Fisher Investments Editorial Staff

Black Friday X’s and O’s

By, 11/25/2009

Story Highlights:

  • A downward revision of Q3 consumer spending and a dour Conference Board survey don't seemingly bode well for the economy.
  • Retail surveys aren't known for accuracy; global strength will likely compensate for domestic weakness; and the economy can continue higher with or without roaring retail sales.



Forget Thanksgiving football—Black Friday is the "Super Bowl of shopping." As the much hyped first day of holiday shopping looms, here are a few Black Friday x's and o's from the pros:


  • Don't bring kids, tents, or chairs—they'll only get in the way.
  • Peak physical fitness is a must—start regularly walking around the neighborhood a few weeks before Thanksgiving.
  • The mesmerizing macédoine of deals and products will slow your roll—unless you make a detailed shopping list.
  • Fastidiously chart your route by prioritizing items and store hours.
  • If your husband planned a surprise trip to the Bahamas—better postpone it.

But will consumers show up this year? Seemingly, Tuesdays' downward revision of Q3 consumer spending and GDP and a Conference Board survey hinting holiday shoppers may spend 7% less than last year don't bode well.

But we think global strength can outweigh domestic weakness. The economy doesn't need roaring retail sales to continue higher. And those pesky holiday surveys? Turns out they rarely pin the gravy on the potatoes. Shoppers will say what they say. But what they actually do may be something else entirely.

Last year's Conference Board survey predicted households on average would spend 13% less than the previous year. Overall retail sales were only 3.4% lower—not nearly the decline suggested. Even more astonishing, 2008's notable but hardly world-ending 3.4% decline was one of the worst in recent memory. Clearly, American consumers are pretty resilient.      

That's not to say this season's sales will go gangbusters. Rather, we'll know when we know—don't count your turkeys (or lack of turkeys) before they hatch. Further, no matter how weak US holiday spending may or may not be—the US is only one country. Consumption is on the up and up globally. Nowhere is that more apparent than in emerging markets. Chinese retail sales, for example, soared an annual 16.2% in October.

In all, nail-biting about consumer spending tends to be a bit overwrought. Volatile discretionary spending is the lesser fraction of total household consumption. The lion's share comes from inelastic items like toothpaste, food, or medicine—goods most folks need to purchase, come hell or high water. Though consumption is a large part of GDP, it's actually fairly stable and contributes less to GDP growth or decline than most folks think.

Business investing drove most of this recession's losses and will drive GDP's recovery. Balance sheets are cash-rich right now and firms lean and mean. Continued revival seems likely—a view supported by the Fed's recently higher 2009 and 2010 growth forecasts. Neither Black Friday nor holiday shopping generally will make or break economic recovery.

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.


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