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News January 28, 2019

Shutdown Ends, But Some Promo Firms Still Feel The Effects

A nonpartisan organization estimated $3 billion in total U.S. economic activity could have been permanently lost because of the partial government shutdown.

By  Christopher Ruvo

The partial government shutdown has ended after President Donald Trump inked a measure that provides three weeks of stopgap funding, but some in the promotional products industry say ripple effects from the longest closure of the federal government in history aren’t about to dissipate overnight.

Previously, certain distributors – particularly some that do business with federal agencies – told Counselor that the shutdown was impacting their businesses. Recurrent complaints among affected firms included that federal clients were halting bid requests and/or putting off orders.

Steve Flaughers, for instance, said an approximately $10,000 uniform order with a division of a federal agency was on hold until the government reopens. But even with the shutdown now at least temporarily ended, the CEO/president of Ohio-based Proforma 3rd Degree Marketing (asi/300094) told Counselor that the order was far from top-of-mind for the federal client.

“Unfortunately, it’s not like a magic ‘shutdown-is over’ wand is waved and everyone gets their purchase order,” Flaughers told Counselor. “We must wait for everyone to report back to work. I’m sure at the time of the shutdown clients and government workers had other important matters on their desk besides our PO. From what we can tell, our PO will probably be pushed back until late February.”

And that might even be optimistic.

Both federal workers and companies within and outside the promo industry that do business with the government worry that Trump could shut the government down again once the stopgap funding measure concludes on Feb. 15.

Nonetheless, some analysts think that, rather than risk more economic impact from a second shutdown, the president could use executive powers to declare a state-of-emergency to bypass Congress and draw the funds he desires to build a wall along the U.S.’s southern border. Trump believes the wall is essential to help prevent illegal immigration, though Congressional Democrats vehemently disagree – the root of the impasse that led to the shutdown.

According to the nonpartisan Congressional Budget Office, the federal shutdown cost the U.S. economy $11 billion. While much of that hole will likely be filled as government workers return to their jobs, the CBO estimates that as much as $3 billion in economic activity could be lost for good. The CBO also projects that U.S. economic growth will weaken in 2019, falling from a 3.1% gain last year to 2.3% this year. Promotional products distributors generated a record $24.7 million in sales in 2018, a figure that equated to nearly 5% year-over-year growth. Some promo executives are expecting growth of 3% to 5% this year.

For Flaughers and other promo pros, the hope is, of course, that the government will remain open. He doesn’t anticipate any lasting economic impact to his sales from the shutdown. “It’s just about getting over a small hump and getting back to business,” Flaughers told Counselor. “If you prepare your business for emergencies, you shouldn’t have much of a problem. Thankfully for us, proper planning and being able to provide so many things (print, promo, apparel, multi-media) to diverse clients in many different sectors, means we were and are well-prepared and are not hurt on cash flow or otherwise.”