Consumer Credit and Black Friday – Is This Year's Retail Surge Good News?

Coming the day after Thanksgiving, Black Friday marks the opening of the holiday shopping season. Retailers throughout the nation were a bit edgy this year, worried about the effects of the economic woes that have filled the headlines in recent months. While consumer credit numbers have been faltering in recent months, apparently, retailers did not suffer the declines in consumer spending that they feared. Consumers, it seems, did their job – they whipped out the plastic and consumed, to the relief of retailers everywhere. But, is that good news?

During the high traffic shopping weekend, viewers were treated to videos and photos of throngs of frenzied, shrieking shoppers and crowd control police, gathering in the dark for midnight and pre-dawn openings promising huge discounts and bargains. According to a report published by Bloomberg.com on November 29, 2007, citing data from ShopperTrak RCT Corp., Black Friday “recorded an 8.3 percent increase to $10.3 billion” in spending, with totals by the end of the weekend reaching $20 billion. As the sales figures trickled into the media during the week after, headlines throughout the nation heralded retailers' successes.

However, underneath the triumphant headlines, there were some salient spending facts that offer a bit of insight into this year's holiday shopping patterns. There were buyers, but big-ticket items weren't the primary focus of shoppers. Bargain hunting was the true Black Friday shopping sport, with discount stores and big box retailers featuring loss-leaders seeing the bulk of spending, a pattern that was noted by National Retail Federation president, Tracy Mullin, in a press release. Loss leaders are items that are sold at or below cost in hopes of luring customers with the bargain and keeping them there long enough to make other, more profitable purchases.

Holiday spending is often a large portion of retailers' annual profit. With all that is going on in the financial world – the deflation of the housing bubble, the mortgage and lending meltdown, the falling value of the dollar, the rising cost of fuel and other daily necessities – there is less discretionary income available to consumers, as a greater portion of their cash is funneled into keeping their homes, automobiles and buying the essentials of day-to-day life. Thus, holiday spending often become a matter of consumer credit, as buyers lack ready cash and use their already burdened credit cards.

While that may be good news for many retailers, the odds are that it is short-term good news only. The straight fact is that we are on the cusp of a serious economic downturn, perhaps soon to slide into recession, maybe even worse – an actual economic depression. The inflation figures bandied about as though all is well are a farce. How can inflation be accurately measured when such things as food and fuel are routinely not figured in? The figures are deliberately manipulated to hide the degree to which the purchasing power of the dollar has been degraded, as well as the severity of the current economic situation, in hopes of propping up the spending that over 70 percent of the economy relies on for survival.

With credit card debt already at record highs nationally and personal savings hovering at record lows, a surge in consumer spending doesn't speak well for the fiscal future of the average consumer. Not just in concrete terms of money and debt, but also in the sense that it demonstrates a distinct lack of understanding of the overall economic situation facing Americans today. Lacking that understanding means that numerous consumers will continue adding nonessential debt while failing to prepare themselves for the economic difficulties that many expert economic analysts see before us. Part of that preparation is gaining control of spending and reducing debt, so that if there is a recession, there will be less financial pressure from debt obligations to contend with.

Preparation for the financial challenges that many of the best economic minds today see looming ahead -- due to such factors as the affects of the mortgage and lending meltdown being far from over, energy costs continuing to rise as oil nears $100 a barrel, the world starting to gaze upon the dollar with suspicion as the value of their dollar reserves tumble, and federal debt soaring to near inconceivable heights – is essential to personal financial survival. Lower rates of consumer spending would be better news than a surge is, because that would signal a better chance of longterm financial viability for the average person. The media speaks of lagging consumer confidence as though it is a problem that needs to be solved, when it may be, in actuality, the right solution to consumer's troubled financial situation.