Black Friday sales, which represent just another US-influenced aspect of life that has not only captured Australia but the rest of the world, start today. I’m in London and the shops opposite my hotel (the Mandarin Oriental) are promising “up to 30% off” for the Black Friday sales.
Ordinarily I’d be rooting for retailers to have a wonderful weekend of sales, culminating in Cyber Monday sales, when employees use the boss’s computer to keep on buying. But this year, in sympathy with worried home loan repayment sufferers, I’m hoping for an underwhelming Black Friday.
I don’t like “bah humbugging” pre-Christmas sales, so why am I doing it?
Well, I’m looking for two reasons for the tough-talking RBA boss Michele Bullock to lay off any more rate rises. And the best way to do that is to see inflation dropping more than expected.
We know Black Friday brings with it not only a lot of ‘stuff’ for sale, but we also know prices will be cut, and that helps bring down inflation. And then if we see shoppers buying less ‘stuff’, it will show the RBA governor that we are reacting to the past 13 rate rises.
Also, retailers would have to cut prices by more to clear the inventory they’ve bought, which is moving slower than expected. That would also be a plus for bringing inflation down.
Right now, the members of the retail fraternity are expecting a good Black Friday showing. Here’s the take on today’s sales from abc.net.au: “Data from the Australian Retailers Association (ARA), in partnership with Roy Morgan, shows that Black Friday and Cyber Monday sales are expected to account for more than a quarter of all holiday purchases this year. It forecasts shoppers will spend $6.36 billion across the four-day Black Friday/Cyber Monday weekend (24-27 November). That's 3 per cent (or $188 million) higher than last year.”
As I say, I feel bad not backing retailers at this time of the year, as up to two-thirds of their profit is made during the peak Christmas trading period.
Right now, the ARA/Roy Morgan forecasts tip about $67.1 billion will be spent in the November to December 24 Christmas trading period, which is roughly in line with last year's spend.
But if that happens, it wouldn’t be a sign that the so-called “homegrown Inflation” is falling fast enough and that could prompt the RBA to raise again in February or March.
To be fair on someone like me who has been watching the RBA make rate rising and cutting mistakes for three decades — I believe 13 rate rises since May 2022 on top of a mortgage cliff ahead could lead to an RBA-created recession. If inflation doesn’t fall fast enough for Ms Bullock, she could go too far with rate hikes.
The media has been very forgiving of the RBA’s big misses on rates until Dr Phil Lowe made one of the biggest forecasting errors ever and then refused to back away from it when it was clear that it was a bad call.
Call me am economic historian, who has seen a lot of RBA mistakes, but I will say that the Big Bank has always been quick when it is bleeding obvious that it has erred. So, if Ms Bullock does overtighten rates and a recession threatens, I know she has learnt from her past bosses that you have to cut and cut hard when you’ve misread the impact of your rate rises.
I think you can see why I’d prefer a more subdued Black Friday, as it might mean less pain for those who could lose their jobs if the economy heads towards recession.
Mind you, if the Westpac economics team is right, we might be spending less this Christmas. Westpac senior economist Matthew Hassan told the ABC that while shoppers are likely to take advantage of sales over the Black Friday period, Christmas spending is expected to be weaker this year. That's because consumers are feeling "deeply pessimistic", according to the results of the latest Westpac-Melbourne Institute consumer sentiment survey. This widely regarded economic data shows consumer sentiment fell 2.6% to 79.9 points in November (down from 82 in October). Any score below 100 means the pessimists outweigh the optimists.
ARA chief executive Paul Zahra says: “"Last year, Australian spent about $700 per person on gifting, this year they plan to spend about $648."
Maybe, I don’t have to bah humbug Black Friday sales because those 13 rate rises might be working at long last!