Retailers May Be Holding Off on Investments Due to Uncertain Economy

Retailers are waiting longer than usual for the government’s official report on December retail sales, due to the ongoing government shutdown (they were supposed to be out last week).

And CNBC reported that the pause, and the shutdown itself, is prompting retailers to hold off on planned investments this month—a move that could hamper U.S. job growth.

The outlet relayed that Janet Yellen, former chair of the Federal Reserve, said at the National Retail Federation’s Big Show event on Monday that she has anecdotal evidence that businesses “are starting to hold off on investment plans because of economic uncertainty.”

Essentially, retailers are waiting to see if a recession—fueled by the shutdown, the U.S.–China trade war, and a zigzagging stock market—is lurking.

While the National Retail Federation forecasted that retail sales would grow between 4.3 and 4.8 percent in December, some early results—including Macy’s and Kohl’s disappointing holiday data—would suggest that forecast was overly optimistic.

Macy’s reported that sales slowed in sportswear, sleepwear, jewelry, and cosmetics, and it expects to post zero growth in net sales for fiscal 2018, after previously projecting an increase of 0.3 to 0.7 percent. Holiday sales at Kohl’s rose 1.2 percent from those in the same period last year, constituting a sharp decline from its 2017 holiday results, which posted a 7 percent gain.

Whether the U.S. is moving toward a recession is a hot topic for economists right now. What factors might push us there? Writer Bill Conerly did a fantastic job of explaining those in a recent Forbes article. He wrote:

++ “The most common cause of recession in the past century has been Federal Reserve error, when they tighten too much and too long. A key point is that it’s hard to see the error in real time. They may be making a mistake right now. I doubt it, and the Fed doubts it, but we won’t be sure for another year or two. Making me nervous is that I expect the Fed to keep pushing interest rates up.”

++ “When the economy is soft and the Fed is keeping rates low, there isn’t much chance of them triggering a recession. Inflation, yes, but recession, no. Now that the Fed is raising interest rates and running down its securities portfolio, the risk of a recessionary mistake is greater.”

++ “Another possible trigger of a recession in 2019 or 2020 is a collapse in international commerce due to President Trump’s trade wars. That’s possible if negotiations go south, ruined by competing egos and economic ignorance.”

++ “Consumer nervousness is my final worry. Right now attitudes are excellent. Despite the exuberance, the growth of spending matches the growth of disposable income. If, however, consumers become wary of the future, then look for a slowdown.”

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JCK Magazine Editor