Government Shutdown Hit Consumer Spending

Uncertainty about the reopening of the US federal government following the budget stalemate may continue to impact consumer spending.

“While there is some satisfaction at achieving a deal, [the] agreement between the House and Senate merely ensures more opportunities to continue the debate while avoiding tough decisions about our economic future,” according to Matthew Shay, president and CEO of the National Retail Federation (NRF).

Meanwhile, figures from the International Council of Shopping Centers (ICSC) and Goldman Sachs show that weekly retail sales fell 0.7% in the week ending October 12th, with year-on-year sales growth slowing to 1%.

“Sales weakened across the board by store segment – partially a result of the drag from the government shutdown,” said Michael Niemira, ICSC vp of research and chief economist.

It was “hard to say”, he added, how quickly and strongly consumer spending would respond to the reopening of the government.

Shay added: “While there is some satisfaction at achieving a deal, [the] agreement between the House and Senate merely ensures more opportunities to continue the debate while avoiding tough decisions about our economic future.

“As we head into the holiday shopping season, retailers and consumers need stability and certainty from policymakers in Washington and assurance that the economy will not implode due to their actions or, more important, lack thereof.

“This new norm of legislating from crisis to crisis is no way to govern.”

His words came as an ICSC consumer survey carried out on October 10-13 revealed that 40% of US consumers scaled back their spending as a result of the two-week shutdown.

Lower-income households were affected more than upper-income consumers, the survey found, with consumers with an income of $35,000 or less more likely to scale back their spending.

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