After a successful holiday season 2018, the retail sector was immediately affected by the longest-lasting U.S. government shutdown. Although some initially believed the shutdown would affect only the first quarter of the financial year, it was likely that the effect will continue through 2019.
According to a report from the nonpartisan Congressional Budget Office, the federal government shutdown caused economic damage of $11 billion. CBO released a report on Mon. Jan. 28 estimating a loss in economic activity of $3 billion, or 0.1%, during the fourth quarter 2018. The first quarter of 2019 was expected to have a greater impact, with a total of $8billion or 0.2 percent GDP. Although the percentages might seem low, they are significant.
What does this mean to the retail industry and e-commerce in general? The shutdown resulted in the loss of paychecks for more than 800,000 government workers, which had a devastating effect on their families. Even worse, thousands of contractors who work in government were not paid.
The 1 million people directly affected by the shutdown was more than the national average. This made the rest of America concerned about their economic futures and the impact on their financial security. People have been able to see how much they spend on non-essential items and how dependent they are on their paychecks. They also realize the importance of saving, if they have the opportunity.
Businesses have experienced a slump in sales as a result of consumers losing their income and/or committing to fiscal responsibility. My sales decreased significantly in January as I was the president and CEO of a wholesale distributor company that sources products around the world. I believe this is due to the government shutdown. Wholesale distribution is my primary business. We carry overstock, packages change, past seasons, closeouts and other products.
My large retail clients tend to be in the off-price or discount retail category. This gives them an edge during difficult times. Consumers will always look for bargains and low cost items that offer value for money. All retail sectors suffered some damage during the government shutdown. Many consumers only bought the essentials.
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The economic and retail projections that were once clear have been made uncertain by President Trump’s call for a national emergency. Already, the irreparable harm done to the first quarter is complete. It is hoped that this will happen early in 2019, so that any residual effects for the entire year can be minimized and that retail can experience a rapid, strong recovery.
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