Encouraged by generous Black Friday spending, the analysts who watch numbers such as holiday spending suggest that the extra week between Thanksgiving and Christmas this year will create a boon for retailers.
A fair question to ask is, “How can that be?”
Advertising factors in. Resisting the purchase of a tablet computer or some other popular and highly visible item that everyone else seems to own already may grow more difficult as the season progresses, and children who are exposed to an extra week of commercials can become very persistent in their requests.
But gift purchases are discretionary spending, and a logical assumption would be that consumers have only so much extra money. Easy credit makes a difference – and despite all the fiscal contraction over the past few years, consumer credit is still dangerously easy to get and use – but those bills also come due, and Black Friday bills very well could land in shoppers’ mailboxes before Christmas. That may slow spending as Christmas approaches.
On the other hand, more weeks between the holidays potentially mean more paydays, so consumers who are spending cash may well perceive that they have more of it. That does not change the fact that each year has the same number of months, weeks and days, and few people end a year with unexpected cash. Americans may be fiscally reckless, but they do notice when they are running out of money.
They also notice when some pending event is likely to change their income, and right now quite a lot is pending.
Although the recession is technically past, it is not out of sight and its return is not out of the question, especially without some continuing tax cuts. Payroll tax cuts may or may not be renewed. Income taxes may be increased for people who earn more than some threshold yet to be determined. Long-term unemployment benefits are about to run out again. Although nearly everyone expects a deal before the first of the year to avert at least the worst consequences of sequestration, big cuts are not out of the question, and federal job losses and spending reductions would echo through the economy.
With all that in mind, a jump in holiday spending this year does not make a lot of sense, and yet that is the prediction. Black Friday sales were strong, even in view of a growing number of Thursday openings. Shop Local Saturday sales are always hard to quantify, and Cyber Monday (along with every other day of online sales) gobbles up an increasingly large portion of the Christmas-shopping pie. The numbers will be sliced and diced and examined from every direction, but so far nobody suggests they will be anything but up.
Part of the answer may lie in the triumph of hope over common sense. Shoppers who spend as if there is no tomorrow may suspect that when tomorrow comes, it will require painful economies. That is the “eat, drink and be merry, for tomorrow we budget” theory.
On the other hand, hopeful spending – especially local spending – can also be a self-fulfilling prophecy, because it does stimulate the economy. Local wages circulate through the business community; money deposited in local banks is invested in the community, and business owners understand very well the value of seeing the whole community succeed.
A record year of holiday spending would be a very good thing — assuming it is based on more than just the fact that this November had five Thursdays.