Consumers are entering the biggest shopping day of the year wary of higher price levels and the future of the global economy.
Inflation is casting an ominous shadow on Black Friday, on which retailers offer highly discounted prices to usher in the beginning of the holiday shopping season. According to an analysis from Boston Consulting Group, the vast majority of consumers in the United States, Europe, and Australia foresee elevated inflation remaining for a “long time,” predict that the economy will “get even worse” over the course of the next year, and are concerned about rising prices for “essentials” such as food and energy.
“Consumption habits are changing as a result, with shoppers cutting back on nonessential purchases, going out less to save money, and turning to lower-quality items,” the analysis said. “Bargain hunting has become a more continuous activity, as consumers have become more accustomed to checking price tags and looking for discounts over the past few months.”
Approximately 39% of respondents to a Boston Consulting Group survey will “buy more at discounters or value retailers,” while 51% will “cut back on nonessential purchases” and 48% will “go out less to save money.” The majority of respondents nevertheless intend to participate in Black Friday and will more strongly emphasize bargain hunting.
Citizens in every nation examined by Boston Consulting Group plan to reduce their spending on Black Friday, with the exception of the United States, where residents are expected to spend 6% more than last year. German and French shoppers will spend 15% less, while their counterparts in Australia and the United Kingdom will spend 18% less.
Holiday retail sales in the United States are expected to grow between 6% and 8% since last year to possibly surpass $960 billion, according to data from the National Retail Federation. Although the growth appears to surpass the average 4.9% annual increase witnessed over the past decade, the expansion will be mostly eclipsed by inflation, which rose year-over-year at a 7.7% rate as of last month, according to a report from the Bureau of Labor Statistics.
“While consumers are feeling the pressure of inflation and higher prices, and while there is continued stratification with consumer spending and behavior among households at different income levels, consumers remain resilient and continue to engage in commerce,” National Retail Federation CEO Matthew Shay said in a press release. “In the face of these challenges, many households will supplement spending with savings and credit to provide a cushion and result in a positive holiday season.”
Boston Consulting Group indeed found that as many as 47% of customers are “already spending their savings on day-to-day expenses” and 20% “expect their disposable income to deteriorate in the next six months.”
Amazon and FedEx recently revealed efforts to dismiss workers ahead of the holiday season, which is typically a busy time for companies involved in the sale and transportation of consumer goods. The former company introduced layoffs in human resources, retail, and devices divisions. Firms in the technology sector and the entertainment industry have likewise announced significant layoffs in an attempt to minimize costs.
Despite a rise in economic output during the third quarter, the United States previously met the rule-of-thumb definition of a recession, two consecutive quarters of negative growth, as output contracted at a 1.6% annualized rate in the first quarter and a 0.6% pace in the second quarter.