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There’s a 90% chance of a government shutdown according to Goldman Sachs

Sunday Oct. 1 looms as the deadline for a government shutdown that could delay key economic data used by the Federal Reserve to make decisions on monetary policy. And Goldman Sachs doesn’t see things being resolved by then.

Yahoo Finance’s Ines Ferre and Ben Werschkul report:

The chances that the government avoids a shutdown in the next three days are not looking good, according to Goldman Sachs economists.

“A shutdown this year has looked likely for several months, and we now think the odds have risen to 90%,” Jan Hatzius, chief economist and head of global research at Goldman Sachs, wrote in a note to investors.

Hatzius and his team say the most likely scenario is the government will shut down on Oct. 1.

On Tuesday evening, the Senate released what is likely a last-chance deal to avert a closure. The 79-page bill would keep the government open until Nov. 17. It is designed to allow more time for negotiations over a broader spending deal that Congress must pass before the end of the year.

“While there is still a chance that Congress can reach a last-minute deal to extend funding past Sep. 30, there has been little progress made and there is little time left,” wrote Hatzius. “In the seemingly unlikely event Congress passes a short-term extension, we would still expect a shutdown sometime later in Q4.”

Even if Washington’s drama this week is resolved, lawmakers face an even more consequential deadline on Dec. 31 when they need to enact spending bills for the entire year.

If the government shuts down on Oct. 1, Hatzius says, a fast reopening seems unlikely “as political positions become more deeply entrenched. Instead, political pressure to reopen the government is likely to gradually build.”

It’s an assessment that has been shared by other observers with a worst case scenario for the economy being a protracted one.

Moody’s Analytics chief economist Mark Zandi has even floated the idea of a shutdown that stretches throughout the entire fourth quarter, smashing the all-time record of 35 days and cutting 1.2 percentage points from fourth quarter growth.



finance.yahoo.com

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