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— This is the script of CNBC's news report for China's CCTV on January 7, 2018, Monday.
Economy loss caused by U.S. government shutdown can be said diverse. If we see that from its scale, government shutdown makes a $650,000 loss to U.S. economy weekly, Standard & Poor's said in the end of 2017
Apart from the state security this kind of basic function, the rest institutions close, makes 800,000 employees into leave and 1300,000 work without payment. And for example, the centers for disease control and prevention will lose its ability to respond to the flu, the food and drug administration will be forced to halt routine inspections, the Securities and Exchange Commission will be forced to halt new investigations, the national museum will close, NASA will suspend some programs etc.,.
But for these direct impacts, people more worry about the long-term indirect influence to industries. For instance, many concerns about the blow to agriculture as the shutdown timing is the key point when U.S. farmers waiting for subsidiary, loans and data to plan spring planting.
American agriculture just lost some foreign market share because of trade friction and experienced a fall in commodity price, if U.S. government shutdown, the $1.2 million bailout plan would be put aside, and that will delay farmers' purchases of seeds, fertilizers and chemicals, which in turn affect costs and harvests.
On financial market front, commodity traders really rely heavily on data released by agricultural department. Some projected data about global agricultural trend cannot be processed because of government shutdown, including the importing and exporting data of soybeans these key products and that may roil market sentiment and judgment. Agriculture is just one of those industries; many people are anxious waiting for government re-operation. How much will this shutdown cost? Analysis thinks that depends on how long the shutdown will last.
For example, some analysis take the U.S. government shutdown happened in OCT 2013 as a reference, that shutdown lasted for 16 days, weighting GDP growth down to 0.2% to 0.6%, with a direct economy loss of $2 billion to $6 billion, but Standard & Poor's believes the real loss, including in-direct impact made by consumption and investment information missing, actually cost $24 billion that year.
And all investment banks and analysis institutions think the longer shutdown makes greater economy loss. Let's have a look over this chart.
Moody's sees a 0.2 percent drag on annualized GDP in the fourth quarter of the year, America Merrill Lynch think that would be 0.5 percent. If the shutdown lasts more than a month, Moody's thinks it will drag GDP growth by more than 1.4%, while bank of America Merrill Lynch is pessimistic about a 2% drag
The longer the U.S. government shuts down, the worse it is for the economy. Generally, shutdown doesn't influence stocks market a lot, because the market thinks government will re-open soon, but once shutdown lasts too long time, then it's possible to see the market becomes more pessimistic because of uncertainty. We will keep an eye on this issue.