You're a Mean One, Congress: How the Fiscal Cliff Killed Holiday Shopping
Well, it's looking like this may officially be the year that Congress stole Christmas.
Reuters reports that, according to early data, the U.S. may have just experienced its weakest holiday shopping season since the woeful days of 2008, when the country was still dealing with, you know, a financial crisis and a recession. Holiday-related spending from late October through Christmas inched up 0.7 percent this year, down from last year's 2 percent growth, according to MasterCard Advisors SpendingPulse. Other data trackers found similarly skimpy results.
What happened? Weather was probably part of the problem. Superstorm Sandy smashed into the Atlantic in November, bringing business to a halt, and winter storms in December may have also depressed sales.
But Santa, Rudolph, Dancer, and Prancer also appear to have collided head on with the fiscal cliff. Americans are watching the negotiations in Washington carefully, and after months of shrugging them off, recent surveys show the impasse in Congress appears to finally be taking a psychological toll on country, making everyone feel a bit nervous about opening their wallets.
Overall consumer spending actually rose in November, despite that possibility that taxes would shoot up in the New Year if Congress couldn't strike a deal. But over the last month or so, Americans have become increasingly pessimistic. In December, consumer confidence suddenly fell to a five-month low. And although correlation isn't causation, it's probably not a coincidence that it happened at the same time that the cliff negotiations seemed to stall. According to Gallup, only half of Americans now believe it is very or somewhat likely that we'll avoid the cliff, down from 58 percent at the start of the month. If they were putting off purchases early in the shopping season thanks to the threat of storms storms, it's possible they decided to cut back once they hit the stores thanks to the threat of Washington.
And the talks between Congress and the President appear to be more than just a passing interest for the public. More than 60 percent of Gallup's survey takers said they were following the negotiations somewhat or very closely. That makes sense: this isn't a remote policy debate. People want to know if their take-home pay is going to shrink in the new year.
For a while, it seemed that there was a bizarre split between businesses and regular consumers when it came to the cliff. Corporations, which tend to have a longer economic outlook than your average family, have been pulling back on investment in things like software and machinery for months. But consumers have kept on spending, which has helped buoy growth. Now, if Christmas holiday spending is any indicator, it appears regular consumers have gotten nervous as well.
You're a mean one, Congress.
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