The 38 day Shutdown engulfs customer sentiment

In an article on the latest reading of the University of Michigan's Consumer Sentiment index for October I highlighted how the government shutdown was increasing anxiety among customers.'

The shutdown, now in its 38th day shows no sign of getting resolved with our powers that be in Washington, with both sides dug in.

The shutdown is hitting the economy hard; here are are some estimates.

• According to the CBO, the shutdown has already cost the country $18Bn. It believes that the number will only intensify
• Most of the hit would be temporary, and recovered in Q1-2026, but it believes that $14Bn might never be recovered.
• GDP is already poised to be at least one percentage point lower in the fourth quarter.
• Once the shutdown reaches the six-week mark — the group expects real GDP growth to be 1.5% points lower in the fourth quarter, a reduction of $28Bn. And if it extends to eight weeks, roughly around the Thanksgiving holiday, the hit to real GDP will grow to 2%, or $39Bn.
• Multiple factors are driving the pullback in economic activity, including fewer services provided by federal workers, lower output in the private sector and less federal spending on goods, services and food assistance.
• Adding to job woes: If all furloughed workers were to be counted as unemployed on temporary layoff, the group estimates the unemployment rate would climb 0.4% in October as a result. That would mark the biggest one-month jump in the jobless rate since the onset of the pandemic.

The estimates of the total damages runs a pretty wide gamut from $15Bn to $30Bn according to these estimates.

[caption id="attachment_6174" align="alignnone" width="643"] Shutdown_cost_2025-11-06[/caption]

Add that to a weakening labor market, with AI replacing workers, and government workers furloughed and facing significantly higher health insurance costs, the economy seems to be in a precarious spot, with the Capex spend on AI infrastructure the only bright spot.

But even that appears to have developed cracks with the Nasdaq Composite losing 4.5% this week, its worst week since April 2025.

Lets hope our esteemed house and senate members come to a compromise soon.