“The likely reality in this holiday season is that we see fairly subdued sales because volumes are growing, but at a moderate pace, and [retailers have] much less pricing power.”
Retailers were “incentivising via discounts and different forms of promotions” for those at the lower end of the income spectrum while also “trying to grab higher-income individuals to make purchases during this wider window”, he said.
Although headline inflation has ebbed from the historic highs of the past couple of years, consumers “remain extremely frustrated by the persistence of high prices”, the University of Michigan said this week in a monthly survey.
Consumer spending has been the main driver of America’s robust economic growth in recent months. But consumer confidence is still well below the long-run average, sentiment surveys show.
The prospect of a fresh round of tariffs under President-elect Donald Trump’s incoming administration raises the risk that inflation could take off again, economists have warned — posing a fresh drag on sentiment.
“Donald Trump’s return to the White House with a Republican majority [probably leads] to higher inflation, slower GDP growth, and increased budget deficits,” Roland Fumasi, food and agribusiness analyst at Rabobank, said in a note.
If Trump increases tariffs, that would “lead to a rebound in inflation and a slowdown in economic growth”, he said.
“The negative impact on growth could be mitigated by tax cuts and deregulation by a Republican Congress. However, this would increase the budget deficit and reinforce inflation, especially in combination with reduced immigration,” he added.
Black Friday is one of the busiest times of year for consumer goods stores, and the period between Thanksgiving and Cyber Monday — the Monday following the holiday, when electronics vendors discount goods — is critical to retailers’ annual revenue.
NRF chief economist Jack Kleinhenz said households’ finances were in “good shape”, offering “an impetus for strong spending heading into the holiday season”, although “households will spend more cautiously”.
Brian Cornell, Target chief executive, told analysts last week consumers were becoming “increasingly resourceful” in the way they shopped, “focusing on deals and then stocking up when they find them”.
The store group, which disappointed Wall Street last week by forecasting flat sales in the fourth quarter, ran a three-day “Early Black Friday” promotion in early November.
Last week it launched a promotion titled “Black Friday deals” which will last to the end of the month, including items such as half-price Christmas trees and headphones.
Walmart, the world’s largest retailer, launched the first of two week-long “Black Friday Deals” events on November 11.
The second will begin on Monday, offering markdowns on televisions, iPhones, toys and jeans, among other items.
Amazon’s “Black Friday Week” began on Thursday local time. Home Depot’s “Black Friday Savings” offer lasts from November 7 to December 4.
Written by: Gregory Meyer in New York. Additional reporting by Will Schmitt in New York and Madeleine Speed in London
© Financial Times
