Amazon held what amounted to an extra Prime Day in October, blanketing its site with deals. Best Buy rolled out Black Friday-level sales last month. And on Friday, Kohl’s entered the first 200 people to walk into each of its stores into ''a sweepstakes'' with prizes including gift cards to Sephora and a family trip to a Lego land resort.
With the arrival of the all-important holiday shopping season, retailers are not just competing with one another to attract customers. They are also competing against the clock. For now, Americans are spending, buoyed by pandemic-era savings and a red-hot labor market. But at the same time, prices are climbing at the fastest pace in decades and the Federal Reserve is attempting to rein them in by raising interest rates. That effort to curb demand by making borrowing more expensive is, in turn, making consumers pessimistic about the economy. And a recession is a distinct possibility. Retailers, some of them sitting on a glut of inventory, want to sell as much as they can while consumers are still pulling out their wallets. So they are barraging customers with discounts, hoping to entice them to buy before an economic slowdown causes a change in behavior once more. Whether retailers succeed will have profound implications. Billions of dollars are at stake, and companies will be watching the outcome closely as they make hiring and investment decisions for the new year.“We’re going to spend a lot of time right now focused on executing our plan, getting through the holiday season and then assessing the consumer and the overall retail landscape as we look to 2023,” Brian Cornell, the chief executive of Target, said on a call with analysts this month. More broadly, retail sales during the holiday shopping period could provide clues about the trajectory of the economy in the weeks and months to come. For the overall economy, I think that it’s going to be very important to look at what the consumer is doing because really that’s going to be your key indicator'' said Lydia Boussour, an economist at EY-Parthenon. “It’s the key engine of growth. ”Forecasters generally believe that consumer spending, which accounts for about 70 percent of total economic growth, will remain strong in the fourth quarter, in large part because of household savings. Collectively, Americans by the middle of this year were still sitting on about $1.7 trillion in extra savings accumulated during the pandemic, based on Fed estimates, thanks in part to government aid. But in September, the most recent month for which calculations were available, Americans saved only 3.1 percent of their after-tax income, less than half the share before the pandemic. And poorer Americans are seeing their savings dwindle even faster than wealthier ones. Meanwhile, credit card balances in the third quarter swelled 15 compared with a year earlier, according to the Federal Reserve Bank of New York. That was the largest increase in more than two decades, as consumers increasingly rely on credit even as borrowing costs are rising.
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