Wednesday, February 8, 2023

“Black Friday” in the US hit hard on persistent inflation

Big discounts are expected in the United States this “Black Friday”, the traditional start of the Christmas shopping season, but it will be a challenge for consumers to participate in the event amid strong inflation.

A year ago, retailers faced product shortages due to delivery delays and factory shutdowns due to the Covid-19 pandemic.

To avoid a similar situation, the region stepped up Christmas imports this year, but was left vulnerable to oversupply as consumers cut back.

Neil Saunders, managing director of consultancy GlobalData Retail, said: “Yesterday a lack of supply was the problem.” “The problem is there are too many things on sale today”, he said.

Saunders explained that retailers have reduced inventory in recent months, but the excess supply creates exceptional conditions for bargain hunters in sectors such as electronics, home appliances and clothing.

Juameelah Henderson always checks out what’s on sale, “but more so now,” she explained, walking out of an Old Navy clothing store in New York, four bags in hand.

The prices “were great,” he said.

The high cost of gasoline and household staples like meat and grains is an economy-wide problem, but they don’t burden everyone equally.

“Low-income (consumers) are clearly more affected by higher inflation,” said Moody’s analyst Claire Lee, “because they tend to spend proportionately more on staples.”

– Declining savings –

The price rise gradually comes down. But even so, the consumer price index on November 10 was up 7.7% in 12 months, a record high for Americans.

So far, US consumers have been able to weather the various crises they have experienced since the start of the pandemic, spending more than expected, even as confidence indicators show concern.

Part of the explanation lies in unusually strong savings, as many households took advantage of government aid during the pandemic, when consumption was at record levels due to restrictions imposed to combat the spread of the virus.

But the cushion is starting to shrink: After a peak of $2.5 trillion in mid-2021, US savings are set to fall again a year later to $1.7 trillion, according to Moody’s.

And consumers with annual incomes below $35,000 are the first to be affected, with their savings falling by 39% during the first six months of the year. As a result, according to data from the Federal Reserve (Fed, Central Bank), consumer debt is growing.

“We see continued pressure,” said Michael Witinsky, general manager of low-cost chain Dollar Tree, who sees a “shift” in consumers “who are more focused on their needs and trying to make sure that They have enough money to last a month”.

– Composite Image –

Retailer earnings reports in recent days have painted a mixed picture of consumer health.

The Target supermarket chain was affected, experiencing a sharp decline in October sales that could herald a weak holiday season.

“We have had consumers dealing with very stubborn inflation quarter after quarter,” Chief Executive Officer Brian Cornell said on a conference call with analysts. “They’re very cautious, they’re very cautious, and they say, ‘Okay, if I have to buy, I want it to be a good deal.'”

But competitor Lowe’s, which specializes in decor, is optimistic, pointing to a “solid” third quarter with no signs of weakening. CEO Marvin Ellison said, “We’re not seeing anything like a decline in purchases.”

Consumers like Charmaine Taylor, who frequently checks airline websites, are keeping track. So far, Taylor has seen her travel aspirations frustrated by the exorbitant prices of plane tickets. The woman who works in childcare doesn’t know how much money she’ll be able to spend on gifts for her family this year.

“I’m trying to buy some gifts,” Taylor said earlier this week at a park in Harlem. “I don’t know if I’ll be able to do it. Inflation is hitting very hard.”

JMB/TJJ/Advertisement/Shri

Nation World News Desk
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