Dollars and Sense: Desperate retailers and consumers

When Black Friday comes. Though we’ve been seeing Christmas ads since before Halloween, today is officially the first day of the holiday shopping season. Is it too early to say how we’re doing? Yeah, it probably is, though we are getting some early indicators. Even before Black Friday we saw some unprecedented price-cutting from the discount chain Walmart, some earlier-than-usual deals from online company Amazon.com, and price-match promises from retailers Best Buy and Target. And we also saw a lot of retailers open on Thanksgiving Day, which is distasteful to a lot of us, though apparently not to those who were camping out all day and not enjoying the holiday anyway.

Desperation? So does that mean these retailers are already desperate? I do think there’s a bit of desperation in these behaviors, from both the retailer and the consumer. On Tuesday, the Conference Board released its October Consumer Confidence number. Before I tell you the number, let me share a bit of context. That number got as low as the mid-20s during the depths of the Great Recession, but it’s been on an upward trend since about 2009. This month, though, it fell 2 points to 70.2. That drop is a bit ominous, or—at a minimum—it reflects anxiety about the economy.

Trudging along. Bill Hampel, chief economist of the Credit Union National Association, said that when you net it all out, spending this year should be slightly better than last year, about 4 percent better. That’s a slight improvement from last year, but not great. It’s an indication of what we’ve been saying all year about the economy: that it’s been growing, but slowly. Retail sales and directly related activities account for the majority of economic activity in the country, so these numbers are not just curiosities. I can tell you the markets are watching closely and they’re not loving what they see. According to Reuters, the number of U.S. retail equity shares being borrowed, a proxy for short-selling, is seeing a surge. That could be a sign that analysts are expecting a weak holiday retail season.

More records. Speaking of the markets, they continue to climb despite this mediocre news. On Monday the Nasdaq rose above 4,000 for the first time in 13 years, since the tech bubble of 2000. The good news about this rise in the Nasdaq is that this time most people think the rise is real. In 1999 and 2000, we saw tech stocks go public almost every day, and companies had billion-dollar market values while having little sales and no profits. That’s not the case this time around, so that’s a good sign.

Iran industrial complex? One unusual phenomenon we saw this week came on Monday and Tuesday when the nuclear arms deal with Iran moved the markets upward. Lots of folk are saying this deal with Iran is bad for U.S. national security and Middle East stability, but the markets liked it. The interim agreement between Iran and the United States and five other nations would have Iran curtailing its nuclear activities in return for reduced international sanctions on car parts and commodities including oil and gold. The deal prompted shares of airlines to jump, along with those of auto-parts makers. So should we be worried that what’s good for the economy might be bad for the country? That’s precisely what President Dwight D. Eisenhower warned against when he gave his famous “military industrial complex” speech as he was leaving office. And what the Bible warned against when it said the love of money was the root of all evil. These are not bad lessons to contemplate as we enter the holiday season.

The week ahead. November is turning into December, so we’ll be getting a lot of November reports in the week ahead. On Tuesday we’ll get auto and truck sales. On Wednesday we’ll get new home sales. On Thursday we’ll get new gross domestic product numbers, and on Friday comes the monthly unemployment number. These are just the reports that have historically moved the markets. We also get a ton of lesser reports. By my count, at least 30 government reports will be coming out this week alone. The moral of that rundown is don’t pack up 2013 yet; there’s still plenty of action ahead.