Black Friday has become an annual cultural milestone, a kind of check-in point that is thought to reveal the American consumer’s state of mind. Results this year confirm what data from other sources tells us—that there is no longer a singular “American consumer.”
Looking at headline results and watching the hyped Black Friday coverage on news channels, you’d think that Americans are in uniformly robust financial form. We saw swarms of shoppers rouse themselves from turkey-induced stupors to hit the malls as early as Thanksgiving evening, shelling out big bucks for luxuries like flat-panel TVs, gaming consoles and high-end electronics.
But the hoopla petered out when November sales were tallied. According to research firm Retail Metrics, a surprising 56 percent of retailers fell short of forecasts. High-end stores fared better on average than mass-market stores. For example, Saks, Nordstrom and Tiffany all reported mid-single-digit sales gains. But Wal-Mart’s sales fell 0.1%, the retailer’s first monthly decline in more than 10 years and “dollar” stores showed anemic gains as well. The International Council of Shopping Centers, calling the month’s results “soft,” lowered its forecast for holiday sales.
What’s going on?
These early holiday sales results are actually part of a trend that has persisted for the past five years—a trend in which one group of Americans prospers at accelerating rates, while another group lags the broadly, mostly positive headline numbers. According to the most recently released Federal Reserve Survey of Consumer Finances:
- Higher-income Americans saw gains in median income, even starting from a much higher base, while the median income of moderate- and low-income Americans was flat or for some income groups even fell.
- Lower-income families report a strong decline in savings activity, compared to a modest pullback for high-income families.
- The debt payments shouldered by moderate- and lower-income Americans grew faster as a percentage of income than those of higher-income Americans.
Credit unions have a unique role to play in addressing these dynamics and many have already implemented programs that specifically benefit lower-income consumers, such as the Earned Income Tax Credit recapture assistance services offered by two community development credit unions Alternatives ($51 million in Ithaca, NY) and El Futuro Credit Unions ($7 million in Porterville, CA).
If you manage to wade through inundating media coverage and speculation to get to the bottom line, cultural milestones like Black Friday will always provide crucial information on economic trends. And think – we have a mere 354 days until it all starts over again!
Concerned about other national trends? Get up-to-date with a streaming recording of the 2006 3rd Quarter TrendWatch, a webinar sponsored by Open Solutions and brought to you by Callahan and Associates. Hear industry experts examine the third quarter trends and to help you gain insight into how credit unions are transforming their business models to meet the challenges of the current environment.