Did Black Friday Do Enough for the Economy?

December 3rd, 2008 | by alexis |

What is Black Friday?

Black Friday is the day after Thanksgiving, the unofficial start of the Christmas season and one of the biggest retail shopping days of the year. Since Thanksgiving always occurs on the last Thursday in November, Black Friday takes place between the 23rd and the 29th of November each year.

While Black Friday is not an official holiday in its own right, it is generally included in the Thanksgiving holiday. Many retail analysts look to Black Friday to make predictions on the strength of consumer spending over the upcoming Christmas season. Black Friday therefore provides a very strong indicator of the strength of the economy.

Black Friday 2008

Black Friday 2008 was not expected to experience retail sales growth over last year — and not merely because of the state of the economy in light of the global credit crisis. Two other factors dampened analyst expectations: the recent presidential election and gas prices.

Black Fridays following presidential elections have been historically weak. This could be attributed to a number of psychological effects: uncertainty about the months to come; pre-occupation with political activity; disappointment in the election results. In any event, the 2008 election was expected to detract from retail spending on Black Friday.

The second factor, gas prices, were only marginally considered as a mitigating effect as they have been low relative to their levels over the past 3 months. In fact, the gas prices going into Black Friday were lower than they had been in more than three years. Despite this, the expectation among consumers of gas prices rising over the next few months from their lows in November was thought to motivate buyers to conserve their money in 2008.

But despite these expectations, retail spending on Black Friday 2008 experienced a 3% increase over 2007 and a more than 8% increase over Black Friday 2006. The increase was attributed to the “door buster” sales hosted by many large retail chains like Wal-Mart and Target — prices that were considered to be too good to be passed up by consumers. Prices at some chains were literally “door busting” — one store clerk at a New York Wal-Mart was trampled to death when frantic shoppers broke through the front door of the store.

Another factor that has been attributed to the increase is the lower number of “shopping days” over this Christmas season. Since Thanksgiving fell on the 27th of November this year, the shopping season consists of only 27 days as opposed to 32 last year (when Thanksgiving fell on the 22nd).

What Does Black Friday 2008 Mean for the Economy?

The Black Friday 2008 spending numbers are encouraging: preliminary reports estimated the total amount spent on Black Friday at $10.6 billion. Whether these results are a cause for optimism over the upcoming Christmas shopping season remains to be seen.

For one, the deep discounts offered by retail outlets for Black Friday are thought to be unsustainable. If prices are substantially raised over the shopping season, consumer spending will probably decrease proportionally. Anticipating this, many consumers may have conducted the bulk of their shopping on Black Friday to capitalize on what they saw as short-lived sales.

If this is the case, shopping that they would otherwise have completed over the course of the season won’t be done, effectively diminishing the one-day sales increase on Black Friday and distributing those increases over the course of the season. Whether that distribution would negate the entire increase is impossible to know.

Secondly, the lower number of shopping days could catch some customers off guard. Whether this will have an appreciable effect is likewise impossible to know; those customers might have been just as unlikely to spend money on Black Friday, meaning that the increases on that day could still be indicative of a stronger retail season.

In any event, the increased sales on Black Friday 2008 is a positive report on the flagging US economy.