A year ago, when all hell was breaking loose in the economy, shoppers spent 7% more at stores during the weekend following
Thanksgiving than they had the year before. What a difference a year makes. Or
does it?
Since last November, the market took a nose dive, then recovered by 63%. Unemployment climbed to 10.2%. People stopped spending and the savings rate shot up to 5%.
Now, with just two weeks left to go before the holiday shopping season officially kicks off, the question is, does the consumer feel confident enough to go holiday shopping?
The “season” officially commences on Black Friday, the extravaganza shopping day on the Friday after Thanksgiving when consumers line up outside of stores hoping to take advantage of the deals and discounts. Last year a Wal-Mart employee was trampled to death in a frenzy after the store's doors opened to the public. This year Wal-Mart has taken several steps to make the experience safer, including keeping stores open from Thanksgiving into the next day instead of closing and having everyone line up outside to await the big morning open.
The forecast
The National Retail Federation (NRF) expects sales during the holidays to drop 1%, and on Thursday, Wal-Mart, the nation’s biggest retailer, said they see a cautious consumer over the holiday season. If sales overall fall , it would be the first time ever they did so two years in a row.
Still, the news on the consumer is decidedly mixed. Consumer sentiment is falling. And yet after a tough year, retail sales rose in August, September and October as shoppers returned to the stores. Analysts thanked back-to-school sales, the cash for clunkers program, a need for warmer clothes as the weather turned colder earlier (it snowed three feet in parts of Colorado days before Halloween), and also pent-up demand after putting off purchases for so long. But some retailers like Costco also benefited from stronger international sales, where the weak U.S. dollar makes it attractive for foreigners to buy U.S. products.
The sales
You can still expect doorbuster sales this year, but the NRF says stores
scaled back on inventory so you may come across some supply issues. Some stores
already launched Black Friday sales as a means to
get people in the doors, so you may find some good deals out there already (check out
the ads here).
The big picture
The economy is growing but unemployment is too. Foreclosures are up. The
market is up. It’s a mixed bag of confusing data. And everyone will be watching
how all this translates to consumers, who are expected to spend an average of
about $680 on holiday shopping. If that number comes in stronger than expected,
it will be a sign that the consumer is feeling more confident. And because the
bulk of our economy is supported by consumer spending, glasses will be raised
cheering the good news. Whether it’s a good thing that our economy is based on
consumer spending is an entirely different discussion!


