Government shutdown hits consumer spending

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(MoneyWatch) A major concern among economists during the government shutdown has been that sharply reduced government spending would stall the struggling recovery. But a poll of consumers conducted by the International Council of Shopping Centers and Goldman Sachs from October 10 to 13 suggests a potentially bigger hit to economic growth. The study finds that 40 percent of consumers are lowering their spending as a result of the shutdown.

The inclination to cut back spending was strongly related to income. Consumers who make $35,000 or less were more likely, at 47 percent, to have already cut back spending. Only 32 percent of those making $100,000 or more were cutting back.

ICSC/Goldman Sachs

Many of the consumers -- 70 percent of the overall number who reducing spending -- indicated that they were cutting back "a little," while the remainder said that their spending reduction was "considerable."

The problem for the economy is that even a small reduction among a significant percentage of the population can take a dramatic toll on the nation's Gross Domestic Product growth. Although corporate earnings are holding up so far this earnings season,they are an indirect indicator of consumer behavior. Plus, the two weeks of shutdown would only have had a limited impact on corporate coffers, given that earnings announcements are for a full quarter, or about 13 weeks of the year. The ICSC/Goldman poll -- a "special demographically-representative U.S. consumer survey," according to the press release -- >provides a current snapshot of reported consumer behavior.

Of course, if the government ends the budget impasse this week, consumer confidence could recover. The question for economists and investors is whether it will rebound quickly enough for retail sales to post a strong holiday season and decent fourth quarter GDP growth.

Image courtsey of Flickr user _Dinkel_

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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.