So we have initial data for US retailers after the Grey Thursday, Black Friday, Local Saturday and Cyber Monday, (Why do we have to hype and label these days to become more of a cheerleader than a reporter?).
The sales numbers have come in a far short of expectations with average spending over the period falling 20% from last year. This appears to be deep discounting by retailers on many items, including electronics and winter apparel, since traffic numbers appear to be about the same as last year.
The US consumer is much smarter than any economist working on Wall Street. Main Street is in a recession. Every metric you look at is seeing a contraction.
Gas usage in US is down some 14% from last year, and no that’s not because of efficiency. Shipping containers are sitting empty around the world as trade grinds to a halt as measured by the Baltic Dry Index, which sits at a 5 year low. All commodities used for construction and expansion are at multi-year lows.
The margin squeeze for retailers this holiday season will be crippling to bottom lines. Deeper discounting after the holidays will be the order of the day, as they try to salvage the quarter which generally ends at the end of January.
Into this fray comes the Fed with visions of interest rate hike dancing in their heads. The idea that even the slightest tightening of credit will help the US economy as Europe, China, and Japan among others continue to ease, is foolish and ill-advised.
Since Main Street did not see much benefit to zero-interest rate policy, since wages did not grow and that the average wage is lower than 1995 levels.
So don’t think anything will get better for US workers as the Fed raises rates. No additional loans will be made, unless you want a car or a student loan.
May I suggest gift cards this year as presents. Easy to wrap and will have additional buying power during the post-Christmas fire sales.