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Did the "fiscal cliff" debate dampen holiday spending?

Posting in Government

Consumers are holding onto their cash.

'Tis the season for disappointing sales. Large U.S. retailers are reporting disappointing holiday gains from depressed consumer spending. Sales performance was the poorest since the peak of the 2008 global recession despite the ongoing U.S. economic upswing, and is likely a consequence of Washington's political shambles.

Trading was muted in the first day of trading after exchanges were closed for the Christmas holiday, but all three major U.S. markets fell slightly. This is being attributed to underwhelming growth in indicators including the MasterCard's SpendingPulse, which increased just under 1% in the two months prior to the holidays, as well as poor sales results from Macy's, Sears and Urban Outfitters that fell 3% (the latter two), and 5% respectively.

Consumer spending runs contrary to a rising consumer confidence index and overall spending, better than expected jobs reports in the wake of Hurricane Sandy, and rising home values as the real estate market recovers. The only uncertainty is government policy, which is presently in limbo as Washington attempts to resolve the "fiscal cliff" debacle, a crisis of its own creation that may now be affecting consumer behavior.

To that end, President Obama returned early from his holiday vacation in an attempt to work out a deal with Congressional Republicans. The Republican-led House has yet to schedule a return date as of this afternoon, but observers hold out hope that an agreement could be achieved before the end of the year.

Last week, progress was dampened after House Speaker Boehner's caucus revolted against even the slightest bargain. Some U.S. businesses are sounding off about how Washington is creating economic uncertainty and influencing buying behavior. The question remains whether compromise is a dirty word.

(image credit: RubyBlues.org)

— By on December 26, 2012, 6:16 AM PST

David Worthington

Contributing Editor

David Worthington has written for BetaNews, eWeek, PC World, Technologizer and ZDNet. Formerly, he was a senior editor at SD Times. He holds a business degree from Temple University. He is based in New York. Follow him on Twitter. Disclosure