Persistent inflation overshadows Black Friday in the US

Large discounts are expected in the United States this Black Friday, the traditional start of the Christmas shopping season, but the challenge will be to make consumers spend in a context of strong inflation.

A year ago, retailers were facing product shortages due to delays in distribution and factory closures due to the Covid-19 pandemic.

To avoid a similar situation, the sector anticipated Christmas imports this year, but was vulnerable to oversupply at a time when consumers are tightening their belts.

“Supply shortages were yesterday’s problem,” said the CEO of consultancy GlobalData Retail, Neil Saunders.

“Today’s problem is having too much stuff” for sale, he added.

According to Saunders, retailers have reduced their inventories in recent months, but the oversupply creates exceptional conditions for bargain hunters in areas such as electronics, appliances and apparel.

Juameelah Henderson always checks out what’s on sale, “even more so now,” she said, leaving New York’s Old Navy clothing store with four bags in hand.

The prices were “very good”, he explained.

Higher costs for gasoline and for household staples like meat and grain are an economy-wide problem, but they don’t impact lives across the world in the same way.

“You [consumidores] Low-income families are clearly more affected by high inflation,” said Claire Li, an analyst at Moody’s, “because they spend more, proportionately, on basic goods.”

drop in savings

The rise in prices subsides gradually. Still, however, on Nov. 10, the Consumer Price Index was at 7.7% over 12 months, a high level for Americans.

So far, American consumers have been resistant to the various crises experienced since the beginning of the pandemic, spending more than expected, even when confidence indicators showed their concerns.

Part of the explanation lies in unusually robust savings. Many families took advantage of the government help granted during the pandemic, when consumption was at historic lows, due to restrictions imposed to combat the spread of the virus.

The mattress is, however, starting to decline. After peaking at $2.5 trillion in mid-2021, American savings dropped back to $1.7 trillion a year later, according to Moody’s.

And consumers with annual incomes of less than $35,000 are the first to be hit, with a 39% drop in their savings in the first six months of the year. As a result, consumer credit is on the rise, according to Federal Reserve data.

“We’re seeing continued pressure,” said Michael Witynski, general manager of the dollar tree chain, who sees a “shift” in consumers, “who are much more focused on their needs and trying to make sure they have enough money to finish the month”.

mixed panorama

In recent days, earnings reports from retailers have painted a mixed picture of consumer health.

Popular retailer Target has been hit, facing a sharp drop in its October sales, which could herald a weak holiday season.

“We’ve had consumers dealing with very persistent inflation, quarter after quarter,” CEO Brian Cornell said on a conference call with analysts.

“They are very cautious. They are very attentive and say ‘well, if I have to buy it, I want it to be a good offer'”, he added.

Already its competitor Lowe’s, specializing in decoration, is optimistic, mentioning a third quarter “solid” and with no signs of weakening.

“We are not seeing anything like a drop in purchases,” said its CEO, Marvin Ellison.

Consumers like Charmaine Taylor, who frequently checks airline websites, are taking notice. So far, Taylor has seen her travel aspirations dashed, due to exorbitant airline ticket prices. And she also doesn’t know how much money she’ll be able to spend on gifts for her family this year.

“I’m trying to buy some gifts,” Taylor said at a park in Harlem earlier this week. “I don’t know if I’m going to make it. Inflation is hitting hard,” she vented.