Government Shutdown May Spare Retailers' Profits

If the government shutdown lasts only a few days—as has been the case in past shutdowns—analysts predict minimal impact on most retailers.

"I would expect to see a dip in food and discretionary spending categories, but it will be small and hopefully short-lived," Joel Bines, co-leader of the retail practice at consulting firm AlixPartners, told The Wall Street Journal. Of the 17 government shutdowns since 1976, most have lasted only a few days, Morgan Stanley found.

Retailers also benefit from the timing of the shutdown, which comes after the profitable back-to-school shopping period and before the holiday season.

However, other economic analysts predict that even a two-week shutdown could reduce the U.S. economy's growth by 0.4 percent in the fourth quarter. In addition, as a natural consequence of the shutdown, the 800,000 federal workers who are furloughed and the additional government employees being asked to work without pay will likely decrease their spending.

Plus, if the government shutdown persists, many businesses—including retailers—could be forced to lay off employees.

For more:

-See this Wall Street Journal article
-See this ABC News article

Related articles:

Holiday Spending Predicted to Spike Despite Consumer Concerns
Holiday Hiring Only Likely to Reach Last Year's Levels at Best
Retailers Need to Get a Head Start on Slower Holidays

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