Fed Shutdown Slowed Auto Sales, Especially On The East Coast

October 28, 2013


People don't like buying cars during economic uncertainty—or when they're not getting a paycheck.

Although we'd argue that it didn't take any massive number-crunching to estimate that consumer purchasing ground down to a slowdown during the 16-day federal partial shutdown, J.D. Power and partner LMC Automotive have looked more closely at sales this month and confirmed that it did have short-term affects on auto sales.

Fed employees weren't in a mood to spend

What's particularly interesting is that this slowdown in buying was limited mostly to the areas with jobs affected by the shutdown, and only for the duration of the shutdown.

The shutdown left its most pronounced affect on the East Coast markets. Regionally, the Atlantic Coastal region (including D.C.), which also happens to have the highest concentratiion of government employees compromised by the shutdown, posted sales down 8.5 percent in the first two weeks of October, versus the same weeks last year.

To get a better national perspective on how much the shutdown slowed things down, Power notes that retail sales during the third week of October were up 7.7 versus year-ago levels. Yet during those first two weeks of October they were up just 1.6 percent.

Not enough to disrupt recovery...at least not yet

The 16-day partial federal shutdown did have a significant affect on sales, and temporarily on consumer confidence; but it appears that it hasn't disrupted the auto-industry recovery that was also underway.

"Light-vehicle sales volume north of 16 million units in 2014 is well within reach; however, there is a higher level of risk that consumer confidence could be distracted again in the first quarter if, as expected, the debt ceiling gridlock returns," said Jeff Schuster, senior vice president of forecasting at LMC Automotive.

The firm has pulled its 2013 sales outlook to 12.8 million, from 12.9 previously. But we'll have a more precise idea of how much the shutdown has affected sales when October's numbers arrive at the end of the week.

And the matter isn't dismissed for long. The virtual stalemate that Washington reached on the issue is going to be back again in the first quarter of 2014, with renewed debate on the debt ceiling.

In other words, Washington, with the auto industry one of the bright rebound spots in the economy and a second round potentially more damaging: Don't do this to us again.


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