Political Standoff Ends Just In Time For Retailers

By Bob Johns

The end of the recent political showdown could not have come at a better time for retailers. As we head into the critical holiday buying season, the partial government shutdown and debt ceiling were weighing heavily on consumers. Unfortunately, the current agreement only raised the debt ceiling for four months, so we may have to revisit this again in January. For retailers, at least the agreement continues through the holidays.

For retailers, the ever-present government bickering is affecting their business. In a recent USA Today article, Mark Zandi, chief economist at Moody’s Analytics, comments, “Every six months, we have a showdown. The constant brinkmanship has weighed on decisions to invest and hire.” The NRF’s David French points out, “Only the collapse of Lehman Brothers in September 2008 has done more damage to consumer confidence [than the shutdown] in such a short period of time. Retailers represent the sector of the American economy that is most closely tied to consumer attitudes, and these numbers are deeply concerning.”

As we have mentioned before, retail is one of the few bright spots in today’s economy, adding jobs nearly every month. Even for the holidays, retailers add hundreds of thousands of temporary jobs that allow people to make it through the holiday season without going broke. Trust me, I have 5 kids and 13 nieces and nephews—the holidays can drain anyone’s finances. Even if you ignore the holiday hiring, retail added 43,600 jobs in August, more than any other sector.

With what keeps occurring in Washington, it is difficult for retailers to forecast for the upcoming holidays, let alone continue hiring. Buyers face an extremely difficult challenge when it comes to making purchasing decisions, but when the government is constantly putting pressure on consumer confidence; it is made that much more difficult. When up to 60 percent of your sales can come in the next few months, every move is exaggerated. The right moves can make the difference between expanding operations in 2014 or scaling back.

Retailers are looking for a 3.9 percent increase in holiday sales this year, according to NRF estimates. “Our forecast is a realistic look at where we are right now in this economy – balancing continued uncertainty in Washington and an economy that has been teetering on incremental growth for years,” said NRF President and CEO Matthew Shay. “Overall, retailers are optimistic for the 2013 holiday season, hoping political debates over government spending and the debt ceiling do not erase any economic progress we’ve already made.” This outlook is echoed by many retailers who are looking to get back on the path to growth and profitability.