The shutdown effect

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As you have seen in this space before, I have said here and there that the economy on many levels remains pretty difficult to get a firm handle on, when it comes to what is really happening.

Against the backdrop of sluggish GDP growth and improving manufacturing numbers, up and down employment, and many other numbers furnished by the federal government which are largely unavailable now, due to the federal government shutdown, the economic waters remain as murky as ever.

As an example, the recent release of the Port Tracker report by the National Retail Federation and Hackett Associates is calling for October imports at U.S.-based retail container ports (12 throughout the country, which the report cites) to be up 9.1 percent annually. This really should be viewed as good news, because the report points out that this number is not impacted by the government shutdown.

But that comes with this caveat that Hackett Associates Founder Ben Hackett told me in an interview: “Our forecast has basically ignored what is happening in Washington. But if the government dysfunction in Congress and the White House continues for more than a couple of weeks, that is another issue, though.”

That caveat and others similar to it are getting harder to overlook and are likely to remain that way until Congress steps up and gets a deal done to get things up and running, not to mention address the latest round of debt ceiling issues.

If this shutdown continues, it is very reasonable to expect a diminished holiday shopping season, regardless of decent enough trends and sentiment that appeared to be intact not all that long ago.

For those in need of further proof, take a look at The Thomson Reuters/University of Michigan’s preliminary reading on the overall index on consumer sentiment, which was released today. According to a Reuters report, U.S. consumer sentiment deteriorated in October to its weakest in nine months, with the shutdown undermining Americans’ outlook on the economy.

“The timing of the fiscal debacle is very bad for retailers going into the year-end holiday season,” said Yelena Shulyatyeva, U.S. economist at BNP Paribas, told Reuters.

It certainly looks like Shulyatyeva might be on to something, considering that the longer the government is shutdown, the more consumer concern will increase and could potentially lead to less buying activity during the holiday shopping season.

This is not to say it will definitely happen but who is to say it won’t either? It is still too early to say what is going to go down but the point is it is anybody’s guess at this point.

Robert W. Baird &Co. Analyst Ben Hartford noted in a research report that Peak Season trends are mixed with retail volumes sluggish but showing seasonal strength so far in October. That can be taken as a good sign, given all the moving parts out there at the moment, but only time will tell the full story.


About the Author

Jeff Berman
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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