As US shutdown starts to bite, how much could it hit economy?

Michael Galletly, who works for the Utah Department of Agriculture, sat down with his wife last week to review the bills and spent more than two hours strategizing how to survive the government shutdown.

The prospects are uncertain.

“I could get by for two months, maybe three meager, very meager months,” said Mr. Galletly, an IT management major who is also president of the American Federation of Government Employees Local 4016. “But I don't know how long it will last.”

The impasse has already hampered travel, delayed government permits and loans and closed some museums.

Now, as millions of federal workers across the government begin missing paychecks this week and cutting spending in response, analysts say the effects will begin to reverberate more widely.

“We are approaching this critical inflection point in terms of the government shutdown and its impact on the overall economy,” said Stash Graham, managing director of Graham Capital Management.

There are already signs that business and consumer confidence fell, perhaps an indicator of upcoming economic weakness.

Analysts say delaying or pausing the release of key economic data such as the monthly jobs report adds to uncertainty, prompting companies to delay spending decisions and increasing the risk of error as policymakers act without the best information.

In Utah, Mr. Galletly said he had started backing out on his purchases ahead of the shutdown, abandoned plans to buy a camper trailer, opted for a used laptop for his daughter and put on hold plans to replace windows, including one that was leaking.

Now, with the prospect of missing his first paycheck next week, he has filed for unemployment insurance and approached the banks that hold his mortgage and car loan in hopes of finding housing.

“A lot of people tend to look at these things and just hope for the best,” he said. “Having been through this before—this is my third government shutdown as a federal employee—I just can’t afford it.”

The impact of a government shutdown on the economy is typically temporary and limited, similar to the disruption caused by a hurricane or severe storm.

Analysts this year forecast quarterly growth of about 0.2 percentage points a week – about $15bn (£11.2bn) – most of which would be recouped after the lockdown ends, when federal workers typically face back pay.

However, this year's clash carries unusual risks.

The Trump administration is threatening unprecedented action, including withholding workers' wages and permanent layoffs, which it began initiating last week.

And that struggle comes against a slowing economy in which businesses and households were already worried about tariffs, changes to immigration rules and previous government spending cuts.

“We've already taken a lot of risks this year,” said Michael Zdinak, chief economic officer at S&P Global Market Intelligence.

“So while the impact of a short-term shutdown should be minimal, a prolonged government shutdown is just another opportunity we're taking that could undermine the strong growth trend we've enjoyed over the last couple of years.”

The Trump administration has taken steps in recent days to ease some of the economic pain, reallocating government benefits to ensure military personnel continue to be paid and some key food programs remain funded.

But the moves also dampened hopes for a settlement, removing some pressure points that were expected to force the two sides to talk about how to resolve their differences over spending.

“If the shutdown extends into next week, we will be heading into uncharted territory,” Wells Fargo analysts wrote recently, noting that most previous shutdowns, especially longer ones, have been much more limited in scope.

S&P Global Market Intelligence estimates the unemployment rate could rise to 4.8% if the lockdown extends through October 18, a significant jump from 4.3%.

The White House Council of Economic Advisers recently estimated that a month-long shutdown could lead to $30 billion in lost consumer spending, in part due to the impact on government contractors, who number in the millions and are not entitled to back pay if their work is affected.

Allison, whose husband works for the Ohio Department of Defense and is now working without pay, said her family of five had already canceled their usual fall weekend getaway to Michigan, opting instead for a day trip to save money.

Although Allison works for the government, her husband is the main breadwinner.

The 43-year-old, who asked the BBC not to publish her full name over fears it could expose her to political attacks, said her family has little room to maneuver in the budget after the cost of living has soared in recent years.

When the shutdown began, they immediately contacted the bank to ask if they could defer their mortgage payment in November. She worries that a long quarantine will force her children to give up extracurricular activities.

“If this continues until December, I don't know what we'll do,” she said.