First signs that US shutdown is impacting consumer spending

By Sober Look

While data is difficult to come by, there are signs that the sharp drop in consumer confidence since the federal government shutdown (see post) is translating into weaker consumer spending. For example the ICSC-Goldman same store sales index has unexpectedly declined.

Source: Econoday

Econoday: – In the first indication on the economic effect of the ongoing standoff in Washington, ICSC-Goldman’s same-store sales index slipped 0.1 percent with the year-on-year rate slipping to plus 1.8 percent from 2.1 percent. The report cites weakness across most segments.

The Johnson Redbook same store sales index has weakened recently as well.

Source: Econoday

Moreover, the ISI Restaurants Sales Survey has been quite sluggish, though it’s too early to tell if this is related to poor consumer confidence.

Source: The ISI Group

Typically we have a lag between a major shift in consumer sentiment and its full impact on spending. Perhaps a more timely indicator of consumer behavior is the stock market. And the stock market is telling us there is a real risk of slower spending growth ahead. The chart below compares the Consumer Discretionary Select Sector (XLY) with the overall market (SPY). The underperformance of consumer discretionary shares just in the last 3 days is quite clear. The government shutdown and the upcoming debt ceiling uncertainty is expected to negatively impact US consumer spending.