What Black Friday and Cyber Monday Tell Us

Jack Ablin Market Commentary

Black Friday, Cyber Monday. Retail registers are ringing in this year’s Christmas selling season, and 2019 is shaping up to be a strong year for America’s shopkeepers. The unemployment rate is nearing a 50-year low and wages are on the rise. Over the last three years, when taking into account the number of Americans working, the average number of hours they work per week and their average hourly rate, America’s collective paycheck has expanded at a 4.5% annualized rate over the last three years, far higher than what the Bureau of Labor Statistics’ average hourly wage increase alone would suggest.

Will fatter paychecks translate into a strong Christmas shopping season? Consumer confidence offers some clues.  While The Conference Board’s Consumer Confidence Index reading has fallen since  peaking in October 2018, its is nearing its highest level in decades. Current confidence readings are consistent with year-over-year retail sales growth between 3 and 4 per cent, representing a strong Christmas season. Even though we expect strong retail sales growth, the composition of sales has changed due to consumer tastes and technology. No longer do consumers line up outside their favorite retailer in the middle of Thanksgiving night to push and shove for the latest “door buster” special. An increasing share of today’s commerce is transacted online: e-commerce represented the two fastest growth categories over the last 12 months, expanding between 15 and 17 per cent, according to US Census Bureau data.  Those sales have come at the expense of traditional department stores and clothing retailers. Americans are spending 7.4 per cent more money dining out as well.

The National Retail Federation (NRF) offers an interesting perspective. They forecast 165 million people to have shopped over the five-day Thanksgiving weekend, with 88 per cent of Americans aged 18-24 looking for holiday bargains. One-hundred fifteen million shoppers are projected to have braved the Black Friday crowds, while 69 million are expected to celebrate the holiday spirit with mouse in hand on Cyber Monday. This past weekend’s shopping results reaffirm our positive view of consumer strength.

The Internet is taking an increasing share of Christmas sales: internet sales eclipsed department store sales in 2006 and haven’t looked back.  Between the two channels, internet retail accounts for more than six times department store sales as of last month, as pointing and clicking replaces pushing and shoving.  Overall, the NRF estimates that holiday retail sales in November and December will be up between 3.8 percent and 4.2 percent over 2018 for a total of between $727.9 billion and $730.7 billion, which is consistent with consumer confidence readings. For these reasons, we expect a very good Christmas selling season this year.