WASHINGTON – How much damage was inflicted on the economy? That’s the million-dollar question as a 16-day partial government shutdown drew to an end as a crippling debt default was averted.
The economy already was slowing ahead of the debacle in Washington, and for more than half of October, there’s been no official government data on which to gauge the health of the economy.
“It feels like things have gone a bit soft, but we really don’t have the hard data to know to what degree that happened,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics.
There’s plenty of anecdotal evidence, though, that harm has been done.
One gauge came Wednesday from the Investment Company Institute, which reported that for the week ending Oct. 9, investors had pulled about $3.1 billion out of mutual funds composed of stocks and another $2.6 billion fled funds made up of bonds.
More evidence came in the recent Economic Confidence Index, published regularly by Gallup. The reading for the three-day period that ended Oct. 3 had fallen 12 points in less than a week. That caught the attention of the National Retail Federation, whose members hire in big numbers.
“Only the collapse of Lehman Brothers in September 2008 has done more damage to consumer confidence in such a short period of time,” the retail federation said Oct. 9 in a statement. “Retailers represent the sector of the American economy that is most closely tied to consumer attitudes, and these numbers are deeply concerning.”
A week later, the confidence reading had fallen another 5 points.
Gallup’s numbers in August 2011, during the last debt-ceiling battle, showed sharp drops in confidence that later translated into lower retail sales and economic deterioration.
This year’s uncertainty follows a drag on growth that began early this year with the end of a holiday on payroll taxes and continued with reduced federal spending, especially defense spending.
Economists think that these factors and political squabbling will combine to shave about 1.5 percentage points off what the nation’s growth rate otherwise would have been in 2013.
“I don’t think it has undermined the recovery … but it certainly is going to take a bite out of growth,” Zandi said. “Brinksmanship just adds to the weight of fiscal policy on the economy.”
Economists are looking carefully at same-store sales and similar retail data to gauge how much the sap in confidence will affect holiday sales.