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Inflation Clouds ‘Black Friday’ Kickoff of US Holiday Shopping Reason

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By John Biers

Retailers unveiled a trove of fresh seasonal promotions Friday, as they try to coax sales from reticent shoppers whose holiday cheer has been tempered by inflation and worries over a softening economy. online news

“Black Friday,” the unofficial start of the US holiday shopping season, announced itself with the annual day-after-Thanksgiving deluge of online promotions and early store openings.

But industry experts have been cautious about this year’s prospects, in light of price pressures that have exacerbated concerns about an oversupply of goods.

A year ago, retailers faced product shortfalls in the wake of shipping backlogs and factory closures related to Covid-19. To avert a repeat, the industry front-loaded its holiday imports this year, leaving it vulnerable to oversupply at a time when consumers are cutting back.

“Supply shortages was yesterday’s problem,” said Neil Saunders, managing director for GlobalData Retail, a consultancy. “Today’s problem is having too much stuff.”

Saunders said retailers have made progress in reducing excess inventories, but oversupply will mean deep discounts in many categories, including electronics, home improvement and apparel.

Online shoppers spent $5.3 billion on Thanksgiving Day itself, according to an Adobe report early Friday, up 2.9 percent from a year ago.

Higher costs for gasoline and household staples like meat and cereal are a nationwide issue, and they do not burden everyone equally.

“The lower incomes are definitely hit worst by the higher inflation,” said Claire Li, senior analyst at Moody’s. “People have to spend on the essential items.”

Diminishing savings

Leading forecasts from Deloitte and the National Retail Federation project a single-digit percentage rise in sales, but this is unlikely to exceed the inflation rate.

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Adobe has forecast an overall holiday sales increase of 2.5 percent, less than a third of the level from last year. Besides inflation, Adobe cited higher Federal Reserve interest rates and an uptick in brick-and-mortar shopping as factors.

European countries like Britain and France have been marking Black Friday for a few years now too, but with soaring inflation, merchants there face a similar dilemma.

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“Retailers are desperate for some spending cheer but the worry is that it could turn out to be more of a Bleak Friday,” said Hargreaves Lansdown analyst Susannah Streeter.

US shoppers have remained resilient throughout the pandemic, often spending more than expected even when consumer sentiment surveys suggest they are in a gloomy mood.

Part of the reason has been the unusually robust state of savings, with many households banking government pandemic aid payments at a time of reduced consumption due to virus restrictions.

But that cushion is starting to whittle away. After hitting $2.5 trillion in excess savings in mid-2021, the benchmark fell to $1.7 trillion in the second quarter, according to Moody’s.

Accompanying this drop has been a rise in credit card debt visible in Federal Reserve data and anecdotally described by chains that also report more purchases made with food stamps.

Mixed picture

Recent earnings reports from retailers paint a mixed picture on consumer health.

Target stood on the downcast side, pointing to a sharp decline in shopping activity in late October, potentially portending a weak holiday season.

The big-box chain expects a “very promotional” holiday season, said Chief Executive Brian Cornell.

“We’ve had a consumer who has been dealing with very stubborn inflation for quarter after quarter now,” Cornell said on a conference call with analysts.

He added that customers are “shopping very carefully on a budget.”

But Lowe’s, another big US chain specializing in home-improvement, offered a different view, describing the same late-October period as “strong.”

“We are not seeing anything that feels or looks like a trade down or consumer pullback,” said Lowe’s Chief Executive Marvin Ellison.

Consumers like Charmaine Taylor, who checks airline websites frequently, are staying vigilant.

Taylor, who works in child care, has had her travel plans thwarted due to exorbitant plane ticket prices — and she is unsure of how much she can spend on family this year.

“I’m trying to give them some little gifts,” she said at a park in Harlem earlier this week. “I don’t know if I’ll be able to. Inflation is hitting pretty hard.”


© Agence France-Presse. All rights are reserved.

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Notes from APS Radio News

Starting from early part of March 2020, the US Federal Reserve embarked on a program of massive infusions of money into the economy.

Between the first few weeks of March 2020 until May of this year, the Federal Reserve added about $4.5 trillion to its holdings, in particular, by purchasing billions of dollars’ worth of Treasury bonds and corporation bonds.

As well, the rate at which the US central bank infused money into the economy was rather great.

Economists say that not only the amount of increases in the money supply are relevant, in the context of provoking higher rates of inflation.

As well, they say that when the money supply is increased at greater velocities, the likelihood of higher rates of inflation occurring is greater.

The Bank of England , the European Central Bank and the Bank of Japan also implemented increases in the money during that period.

Also during that period, various countries imposed lockdowns and restrictions, which resulted in the closings of millions of businesses.

Those closings negatively affected supplies of goods and services.

To the extent that shortages had developed, the combination of shortages and programs of massive increases in the money supply has increased the rates of inflation.

Lockdowns were imposed over a virus that, in the US, for example, has had an average mortality rate of .07% and, for most age groups, a recovery rate of about 99%.

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