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National Restaurant Association - Economist's Notebook: Shutdown adds uncertainty to an already tepid outlook

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Economist's Notebook: Shutdown adds uncertainty to an already tepid outlook

In his latest commentary, the National Restaurant Association's Chief Economist Bruce Grindy discusses the impact of the partial government shutdown.  Both consumers and restaurant operators already had low expectations for the economy, and the shutdown will only add to the uncertainty in the months ahead.

Normally in this space today there would be an analysis of September employment figures, which were scheduled to be released at 8:30am.  But with parts of the Labor Department shuttered along with much of the federal government, the public is denied access to key barometers of the economic recovery.

While the overall economic impact of a partial government shutdown will be limited as long as it is short in duration, the fact that it is occurring at all doesn’t do anything to boost the fragile psyche of consumers and businesses.  To be sure, the political wrangling only adds more uncertainty to the situation, particularly with the significantly more dangerous debt ceiling and default looming in less than two weeks. 

In terms of the impact on the restaurant industry, the shutdown will likely dampen restaurant spending among the roughly 800,000 federal workers who are on unpaid leave.  Whether or not these furloughed workers eventually receive back pay as they did after past shutdowns, they are likely curtailing their discretionary spending until the situation gets worked out, which directly impacts restaurants in those areas. 

In addition, there is a direct and immediate impact on restaurants that are in and around the 401 National Park Service (NPS) sites that are closed as a result of the shutdown.  According to the NPS, these sites collectively average 715,000 visitors per day in October, which means the local economies near the national parks are being negatively impacted by the loss of tourism. 

While the initial impact of the shutdown is mostly regional, the continued inability of the government to break the gridlock dampens economic confidence nationwide – sentiment that was not exactly soaring to begin with.  Even before the government shutdown kicked in, both consumers and restaurant operators were far from bullish about the direction of the economy. 

In a national survey of 1,000 adults conducted September 12-15 for the National Restaurant Association by ORC International, only 21 percent of consumers said they expected the nation’s economy to be better in the next six months.  Twenty-six percent of adults said they thought the economy would get worse, while 51 percent expected things to stay about the same. 

Among restaurant operators, the sentiment was strikingly similar.  In the Association’s September 2013 Restaurant Industry Tracking Survey, only 23 percent of restaurant operators said they expected the economy to improve in six months.  Twenty-two percent of operators said they thought economic conditions will worsen, while 55 percent expected the economy to stay about the same. 

If the government shutdown drags on from days into weeks, look for these economic confidence readings to become even more pessimistic. 

Read more from the Economist’s Notebook and get additional analysis of restaurant industry trends on Restaurant TrendMapper (subscription required).

Outlook for the Economy in Six Months
Restaurant Operators and Consumers

  Source: National Restaurant Association, based on surveys fielded in September 2013

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