Washington Insider: Shutdown’s Impacts on Key Market Data

Bloomberg is reporting this week that the “U.S. growth outlook hangs more than ever on American consumers’ resilience amid stock-market swoons and trade-war tensions, but key data on their spending – the biggest part of the economy – will be missing due to the government shutdown.” The report says, “answers will have to wait since the December retail-sales report is unlikely to be released as scheduled today since the Commerce Department is expected to remain closed.” Failure to reopen soon also would delay last month’s personal income and spending data, due Jan. 31. Together, those reports constitute the most widely watched measures of household consumption, which accounts for about 70 percent of the economy. The disruptions come at a challenging time: plunging regional gauges of U.S. manufacturing and business surveys indicate a slowdown in growth, and some big-name retailers have issued warnings about mixed holiday results. While the solid job market remains a bulwark and consumers are in good shape, more – not less – information is needed to assess if the economy faces bigger-than-anticipated risks. This is one reason investors are nervous and Federal Reserve officials have emphasized patience in raising borrowing costs. “Job growth, income growth and low inflation are all positive for consumer spending,” so having data to confirm would be helpful, said Scott Brown, chief economist at Raymond James Financial Inc. “It could help soothe the market’s fears to some extent.” With no end in sight for the shutdown, a burgeoning concern is that data may not just be delayed, they may also not get collected as normal, Brown said. For now, investors and analysts will have to rely on a patchwork of data. The Johnson Redbook report showed December sales rose from a year earlier, though it tracks a limited sample of results. The Retail Economist???Goldman Sachs weekly chain-store sales figures are another source. Other groups provide clues on individual sectors, such as the National Restaurant Association’s monthly index. Without the government’s retail report, it’s also tough to accurately gauge how consumers are spending on big-ticket items such as cars. Meanwhile, Fiat Chrysler Automobiles NV’s Chief Executive Officer Mike Manley said he’s “concerned” about the shutdown’s impact on the company’s efforts to introduce crucial new heavy-duty pickups. The nuances in signals from the consumer were evident this week in executive comments from Kroger Co., America’s biggest supermarket chain. “They feel incredibly good about the economy but very nervous about where things are headed,” Chief Executive Officer Rodney McMullen said Sunday in an onstage interview at the National Retail Federation’s (NRF) annual trade show in New York. Overall, companies depend on broader economic data to make investment decisions, and without it they’re “to a degree, flying without any instruments,” according to NRF Chief Economist Jack Kleinhenz. The Commerce Department’s monthly data are crucial to get a bigger picture because about 90% of retail sales come from small businesses, he said. Recently, several large publicly traded retailers such as Macy’s Inc. and Kohl’s Corp. provided discouraging updates. The trade association itself is somewhat in the dark without official numbers, “we can’t provide our final report this week either” on holiday spending, according to NRF spokeswoman Ana Serafin Smith. In addition to concerns about U.S. Department of Commerce data, USDA has been forced to delay the release of several market-moving reports at a time when farmers start to make their planting decisions for the upcoming season, Bloomberg said. The USDA’s monthly World Agricultural Supply and Demand Estimates (WASDE) wasn’t released on Jan. 11 as originally planned the agency said. Other key data sets, including figures on grain stockpiles and winter-wheat seedings, were also delayed. Amid the shutdown, the USDA has also stopped publishing data on crop export sales. That comes as China has recently waded back into US markets for soybeans. Without official government figures, the market has been left to rely on rumors and tough-to-confirm sales reports. The WASDE regularly moves agricultural commodities markets, especially this time of year. As a result, significant delays in reporting is an especially “bad, bad deal” for the market, Ted Seifried, chief market strategist at Zaner Group in Chicago, said. That’s in part because the January report finalizes crop production figures from the prior year, which traders and producers use to plan for the coming season. Not having the data, “makes it very difficult for the market to decide on which way we should go,” he said. When the shutdown began choking access to USDA data late last month, “a very significant public good was removed from the market," said Sara Menker, chief executive officer of Gro Intelligence, an agricultural data analysis company. Gro Intelligence, which provides data feeds as well as crop and weather forecasts, is offering free access to its platform for the duration of the shutdown in an effort to mitigate the data gap left by the USDA, Menker said. Cutting off data and estimates for the economy is a significant problem, especially for agriculture – and especially at the same time a policy debate is underway. This is an additional source of pressure for producers, one that should be watched closely as it proceeds. Washington Insider believes.