fb-pixelShutdown could thwart holiday shopping - The Boston Globe Skip to main content

Shutdown could thwart holiday shopping

The National Retail Federation’s forecast for increased holiday shopping doesn’t take into account the possibility that the government shutdown could last for a while.Debee Tlumacki for The Boston Globe/File 2012

NEW YORK — Americans, increasingly optimistic about improving economic conditions, are expected to spend at a more rapid clip during the upcoming holiday shopping season than they did last year.

But that could change if the partial government shutdown that has forced about 800,000 federal workers off the job continues and causes shoppers to lose confidence in the economy.

The National Retail Federation, the nation’s largest retail trade group, on Thursday forecast that sales in November and December will rise 3.9 percent to $602.1 billion. That’s above the 3.5 percent increase a year ago and the 10-year average in holiday sales growth of 3.3 percent.

Advertisement



But Matthew Shay, the group’s chief executive, said in an interview on Wednesday that the forecast was calculated before the government shut down after Congress failed to pass a spending bill by Monday’s midnight deadline. In addition to the furlough of hundreds of thousands of workers, that resulted in the shuttering of national parks and halting of a range of government services.

Shay said the group’s forecast does not account for the possibility that the shutdown, now in its third day, could go on for a prolonged period, which  he defines as two weeks or more. But it does factor in the optimism Americans feel as jobs have become easier to get and the housing recovery has gained momentum.

‘‘What we are trying to balance here is the underlying fundamentals with the economy, which seem strong, against all that consumer unease and the uncertainty coming from Washington,’’ Shay said.

Shay acknowledges that predicting how the holiday season will fare is difficult. In fact, the National Retail Federation has often been either too cautious or too optimistic. Last year, for instance, the group’s forecast of 4.1 percent increase was far higher than the 3.5 percent rise retailers actually saw.

Advertisement



But the forecast nonetheless is an important indicator for retailers that rely on the last two months of the year for 20 percent to 40 percent of their annual sales. The estimates also provide insight for economists into consumer spending, which accounts for up to 70 percent of economic activity.

A big concern is that a prolonged government shutdown could severely hurt the economy and necessarily, consumer spending. For each week the government remains shut, the US economy would lose 0.15 percent of annualized growth, estimates David Stockton, a former research director at the Federal Reserve who is now at the Peterson Institute.

Even before the government shutdown, retailers had reasons to be cautious about their predictions. While the job and housing markets are improving, that hasn’t translated into sustained spending increases among most shoppers. Meanwhile, Walmart Stores Inc. and other low-priced chains say customers continue to struggle with a 2 percentage-point increase in the Social Security payroll tax that started on Jan. 1.

Those worries hurt stores’ sales during the back-to-school shopping season, the second largest shopping period behind the winter holidays.