Confidence, Credit, Income, and Spending

Each year at this time investors hold their breath to see what the Black Friday and Cyber Monday numbers reveal.  If they are up, it may mean positive news for stocks but watch out if the numbers don’t come in as projected.  Well, the good news is that we as investors can breathe sigh of relief as the preliminary Black Friday and Cyber Monday numbers came in substantially better than expected.  Initial reports show that Americans spent a whopping $52 billion over the weekend and another $1.2 billion on Cyber Monday.  On a percentage basis, the Black Friday sales were up 6 to 9 percent over last year (depending upon how you measure the numbers) and Cyber Monday sales were up approximately 15% over last year. 


One of the concerns that economists feared was that the retail sales figures were so strong over Black Friday and Cyber Monday that that strength wasn’t sustainable.  The reason was that since sales were so strong retailers wouldn’t offer additional incentives to draw shoppers in as the holiday season progressed.  Interestingly, however, retail sales have remained strong as most weeks since Black Friday have seen sales rise between 3% and 4% over last year.  Sales figures were projected to be only 2% to 3% over last year and Black Friday and Cyber Monday sales blew these figures out of the water.  According to an article that appeared on there are two more encouraging signs for this year.  First, as of this past Sunday, only about 70% of shoppers had completed their holiday buying as compared to 74% last year and secondly, approximately 9% of shoppers haven’t even started shopping yet as compared to 6% last year.  These figures seem to indicate that there is a lot of shopping left to do and yet sales figures are still up!  While I haven’t found a lot of data reflecting the Madison area, the little I have seen seems to indicate that sales in the Madison area are reflective of the national data.


Part of the reason for the increased sales this year may be because Americans are feeling more confident than last year.  The consumer confidence level as reported by Reuters/University of Michigan has risen each month since June and for December stood at 67.7 vs. 64.1 in November.  Analysts expected the number to come in at 66.0 so clearly people are feeling better.  That positive feeling defies some interesting data though.  Personal income has fallen slightly in recent months and the savings rate has declined even further.  Since sales have increased, this implies that the use of credit has increased as well.  This may not bode well for the economy as we move into 2012 unless these figures stabilize or reverse themselves or else we may see further increases in default rates and/or declining sales next year.


For now, however, I am cheered by the rising stock market today and that the bulk of the economic data reported here is positive.


I wish all of you warm wishes for the Merriest of Christmases and a healthy and prosperous New Year!


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