Will US consumers open their wallets? Cheap clouds ‘Black Friday’ | International Affairs | So Good News

Retailers prepared for their biggest test of the year: Will US shoppers open their wallets for the Black Friday sales that kick off the holiday shopping season?

Consumer confidence is volatile, weighed down by rising inflation in the world’s largest economy, creating uncertainty for this holiday season that begins the day after Thursday’s Thanksgiving holiday.

A year ago, retailers faced supply shortages due to inventory backlogs and factory closures related to Covid-19. To avoid a repeat, the industry has packed up its holiday inventory this year, avoiding the risk of overstocking at a time when consumers are cutting back.

“Inventory shortages were a problem yesterday,” said Neil Saunders, managing director of GlobalData Retail, a consultancy. “The problem today is having too much.”

Saunders said retailers have made progress in recent months in cutting down on overselling but the oversupply is driving the demand for bargain hunters across many categories, including electronics, home improvement and clothing.

Juameelah Henderson always looks for bargains, “but especially now,” she said as she walked out of an Old Navy store in New York with four bags of items.

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The prices for the clothes were “very good,” he said. “If it’s not for sale, I don’t want it.”

Rising prices for gasoline and household items such as meat and corn are a burden on the economy, but don’t burden everyone equally.

“Low income is very sensitive to inflation,” said Claire Li, senior analyst at Moody’s. “People have to destroy the most important things.”

Reducing costs

Leading forecasts from Deloitte and the National Retail Federation point to single-digit increases, but likely not above inflation.

The number of buyers has been increasing by about eight percent annually, which means that the same growth in holiday sales can be matched by lower ratings.

European countries like Britain and France have been observing Good Friday for several years now, also coping with inflation. So the businessmen there face the same problem.

“Investors are looking for some cash but the worry is that it could be a Bad Friday,” said Susannah Streeter, a market research analyst at Hargreaves Lansdown, in London.

US consumers have remained resilient through the unprecedented stages of the Covid-19 pandemic, often spending more than expected, even as consumer surveys show they are in the dark.

Part of the reason has been surprisingly strong savings, with many households banking on government aid during austerity measures due to Covid-19 restrictions.

But the cushion starts to shrink. After hitting $2.5 trillion in excess savings by 2021, the benchmark fell to $1.7 trillion in the second quarter, according to Moody’s.

Consumers earning less than $35,000 were the hardest hit, with savings falling by nearly 39 percent between the fourth quarter of 2021 and mid-2022, according to Moody’s.

Accompanying this decline has been a rise in credit card debt seen in Federal Reserve data and clearly explained by chains that also report large purchases made with food stamps.

“We’re seeing more and more pressure,” said Michael Witynski, head of Dollar Tree, a discount retailer that has seen “a shift” in consumers, “which is more consumer driven and needs-based to try to make the budget work. And stretch the month.”