Many economists right now are expressing concern about a potential Recession within the United States. Constance Hunter, the chief economist and principal of KPMG, says there is a 50-percent chance of a recession this year. This is in line with comments from former Federal Reserve Chair Janet Yellen who said that anecdotal evidence indicates economic uncertainty. From the trade war with China to the government shutdown, retailers have several big reasons to be worried about a potential recession. But what does the risk of a recession mean in terms of practicality and running a business?
Caution and a Lack of Plans
According to Janet Yellen, many businesses are taking the economic uncertainty as their lead and are beginning to delay their investment plans. They simply are unsure how to predict what will happen to the retail market, making it nearly impossible to plan for the future.
Right now, businesses are waiting for some key information before they make any solid plans. They want to have figures on earnings from the holiday quarter as well as economic data. Specifically, businesses of all types need to know whether the economy is heading towards a recession and what will happen with the global trade tensions. Will the government shutdown affect tax refunds? And if so, will that reduce discretionary spending of consumers? While they play the waiting game, many big companies feel that it is unwise to make any large investments.
Greater Delays on Figures
To make the waiting game even worse, the government would have normally released its report detailing December retail sales in early January. This got delayed due to the shutdown. Since the stoppage shows no signs of ending, there is no telling when this report will come out. NRF chief economist Jack Kleinhenz says that we will likely need to wait 15 to 18 days following the conclusion of the shutdown to get data on retail sales.
Other Retailers Show Confidence
Even with the uncertainty concerning the economy and consumer spending, some retailers maintain their confidence. Target CEO Brian Cornell has stood by his statement in 2018 that the consumer environment was incredibly robust, the strongest during his career. In January, Cornell repeated the same feeling, pointing out consumer confidence at the moment. He did, however, cautions that this will likely not last forever.
Each retailer will need to make its own decision as to how to proceed and whether to make major investments. While waiting for government data, those with their own sales data will have a slight advantage in decision-making, but the current economic uncertainty should still encourage a cautious approach.
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