Two Out of Five Americans Cut Spending Amid Government ShutdownMinsi Chung
The U.S. government shutdown prompted two out of five Americans to curb spending, according to a survey commissioned by Goldman Sachs Group Inc.
The survey of 1,025 people, conducted from Oct. 10 to Oct. 13, found that the shutdown had a greater impact on lower income consumers, with 47 percent of respondents who earned $35,000 or less saying they would curb spending. Among those with income of more than $100,000, 32 percent said they would tighten spending.
The pullback shows the effect on consumers from the partial closing of the government that began on Oct. 1 with furloughs for about 800,000 federal workers. Uncertainty over when the impasse will be resolved led to consumer confidence falling to a nine-month low this month to 75.2 from 77.5 in September, according to the Thomson Reuters/University of Michigan preliminary consumer sentiment index.
“It is clear that the fallout of the past two-week impasse in Congress has affected consumers’ willingness and maybe their ability to spend,” Michael Niemira, vice president of research for the International Council of Shopping Centers, who co-commissioned the survey, said in a statement today.
While the majority of those surveyed who were directly or indirectly affected by the shutdown said they would only scale back their spending “a little,” the remainder of respondents indicated they would have to “considerably” hold back.
Retailers are already concerned that slow sales will continue into the holiday shopping season after companies including Macy’s Inc., Nordstrom Inc. and Wal-Mart Stores Inc. reported second-quarter sales that trailed analysts’ estimates. Wal-Mart Chief Executive Officer Mike Duke mentioned the shutdown while addressing analysts at a meeting today.
“It’s on the minds of our U.S. customers,” Duke said. “We’re following this situation very closely.”
The damage to consumer confidence from the shutdown may reduce October new-vehicle sales by as much as 10 percent, according to John Krafcik, chief executive officer of Hyundai Motor Co.’s U.S. sales unit. Hyundai at the start of the month announced a program to allow federal workers affected by the shutdown to defer loan and lease payments to the Seoul-based automaker.
“It’s that anxiety that keeps customers, potential buyers, on the sidelines when making a big purchase like an automobile,” Krafcik said in an interview today with Bloomberg Television.
U.S. Senate Democratic and Republican leaders were working on the details of an agreement late yesterday to end the partial government shutdown and raise the debt ceiling before Oct. 17. The House of Representatives made its own proposal today, which Senate Majority Leader Harry Reid rejected.
Coca-Cola Co. CEO Muhtar Kent today said that if the shutdown continues, the impact will spread throughout the economy.
“If it continues there’s no question that the negative consumer sentiment is most likely going to impact businesses of all nature -- credit, investments, employment, just overall sentiment,” Kent said on a conference call with analysts to discuss the company’s quarterly earnings. “No question about that.”