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Prices for Some Goods Are Actually Falling This Holiday Season

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As inflation slows, prices for some physical goods are falling outright, which could lift consumers’ spirits.American shoppers, burned by more than two years of rapid inflation, are getting some welcome relief this holiday season: Prices on many products are falling.Toys are almost 3 percent cheaper this Christmas than last, government data shows. Sports equipment is down nearly 2 percent. Bigger-ticket items are also showing price declines: Washing machines cost 12 percent less than a year ago, for example. And eggs, whose meteoric rise in prices last winter became a prime example of the country’s inflation problem, are down 22 percent over the past year.Consumer prices, in the aggregate, are still rising, though not nearly as quickly as a year ago. Most groceries still cost more than they did a year ago. So do most services, such as restaurant meals, haircuts and trips to the dentist. And housing costs, the biggest monthly expense for most Americans, are still rising for both renters and home buyers. Overall, the price of physical goods is flat over the past year, while the price of services is up a bit more than 5 percent.Still, economists view the moderation in goods prices as an important step toward putting the high inflation of the past two and a half years more firmly in the rearview mirror. They expect it to continue: Most forecasters say prices for physical products will keep falling next year, especially prices for longer-lasting manufactured goods, where the recent declines have been largest. That should help price increases overall to ease.“We’re just kind of in the beginning of that phase, and we should continue to see downward pressure on prices in this category,” said Michelle Meyer, chief economist for Mastercard.For consumers, who have been dour about the economy despite low unemployment, falling prices on many goods could provide a psychological lift. After the rapid inflation of the past few years, a mere slowdown in price increases might not feel like much to celebrate. But seeing prices fall could be a different story — especially because some of the biggest recent declines have been in categories that consumers tend to pay the most attention to, such as gasoline. (The price of regular gas, which topped $5 a gallon nationally in June 2022, has fallen to just over $3 on average, according to AAA.)Most groceries still cost more than they did a year ago. Maansi Srivastava/The New York Times“People will key in on certain prices,” said Neale Mahoney, a Stanford University economist who recently left a role in the Biden administration. “We know that people will overweight certain things.”The price of many goods soared in 2021, fed by a surge in demand from consumers flush with pandemic relief checks and by supply chain disruptions that limited supplies of many products, especially those from overseas.Many economists initially expected a quick reversal, but instead prices kept rising. Supply chains took longer to return to normal than expected, and Russia’s invasion of Ukraine led to a spike in energy prices in 2022. At the same time, consumer demand for goods remained high, and many companies took advantage of the opportunity to push through price increases and pad their profit margins.Now, however, many of those forces are beginning to fade. Supply chains have largely returned to normal. Oil prices have fallen. Economic weakness in China and other countries has held down demand for many raw materials, which feeds through to consumer prices.Softer demand from American consumers could also be playing a role. The Federal Reserve has raised interest rates repeatedly since early last year in an effort to curb spending and control inflation. Consumers have so far proved remarkably resilient, but retailers in recent months have reported that shoppers have increasingly traded down to cheaper items or waited for sales before buying — trends that could accelerate if the economy cools further next year.“We think that the consumer is going to be looking for value, and that’s because they are very sensitive to price,” Carlos E. Alberini, chief executive of Guess, the fashion retailer, told investors last month. The company has “revisited some of the pricing structure we have in all brands,” he added.The price of services is up a bit more than 5 percent for such things as restaurant meals, haircuts and trips to the dentist.Hiroko Masuike/The New York TimesSome toy manufacturers and retailers that sell toys have also said they expect sales this season to be less robust than in years past and have leaned into advertising their products’ affordability.At many companies, price cuts have taken the form of Black Friday sales and holiday promotions that are larger for some categories of items than in past years. At Signet Jewelers, the big diamond retailer, sales fell in the third quarter, and the company recently said that it expected sales to be lower this holiday season than last year in part because of “elevated promotional activity.”“It’s been a different holiday season,” Virginia C. Drosos, Signet’s chief executive, told investors on a conference call this month. Instead of shopping early, customers are waiting to make their purchases and are looking for deals, she said.Matt Pavich, senior director of innovation and strategy for Revionics, a company that uses artificial intelligence to help retailers set prices, said companies were trying to cut prices before their competitors do.“As prices come down, there’s going to be the race to bring prices down more, get the credit for that,” he said. “We’re going to see retailers really trying to win back consumers’ trust.”Still, prices for most products remain well above where they were before the pandemic. A dozen eggs cost about 50 cents more than in February 2020. Used car prices, another prominent example of pandemic sticker shock, have fallen more than 10 percent from their peak early last year but are 37 percent above where they were in February 2020.Services prices are still climbing more quickly than before the pandemic. Some economists say that goods prices will need to fall further for overall inflation to return to the Federal Reserve’s target of 2 percent a year.“We need pretty substantial deflation, and I wouldn’t call what we’re seeing ‘substantial,’” said Wendy Edelberg, director of the Hamilton Project, an economic policy division of the Brookings Institution. “It’s not even substantial in a historical context.”Indeed, prices of durable goods fell much of the two decades that preceded the pandemic. Long-term trends such as globalization and automation have tended to push down manufacturing costs. Intense competition among retailers, especially with the rise of online shopping, meant those savings were mostly passed on to consumers.Services prices, on the other hand, rarely fall, in part because wages account for a much larger share of the cost of most services. During the decade before the pandemic, services prices gradually rose while goods prices were flat or fell, resulting in an extended period of stable, moderate inflation.Economists don’t expect to see outright deflation, in which prices fall for both goods and services. That’s a good thing: Overall price declines are generally viewed as economically dangerous, if they last.“When demand in the economy is weak, the last thing you want is someone to say, ‘I’m not going to buy that car today because it’s going to be $600 less expensive in six months,’” said Karen Dynan, an economist at Harvard.Brittany Greeson for The New York TimesThere are a few reasons. For starters, in theory, deflation could prompt consumers to hold off on spending, touching off a downward spiral. People may be unlikely to buy today what they expect to be cheaper tomorrow. Once deflation takes hold, it can be difficult to escape: Japan has been stuck in a deflationary pattern since the late 1990s.“When demand in the economy is weak, the last thing you want is someone to say, ‘I’m not going to buy that car today because it’s going to be $600 less expensive in six months,’” said Karen Dynan, an economist at Harvard.For another, companies are unlikely to raise wages in a world where they cannot charge more. And if wages are not going up — or are even going down — it will be harder for households to keep up with fixed bills, like mortgage interest payments.But while broad-based price declines are a problem, most economists view the more limited declines happening now as a sign that the economy is gradually moving past the disruptions of the pandemic.“Supply chains have basically normalized,” said Neil Dutta, head of economic research at Renaissance Macro. “Household demand behavior has basically normalized, the dollar is still pretty strong. I wouldn’t see a reason why goods prices would go higher.” More

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    As Holiday Shopping Season Begins, Retailers Worry

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    Consumer spending has been strong in 2023 despite higher prices and waning savings. But some retailers have jitters heading into Black Friday.Christina Beck is approaching this holiday season cautiously.Ms. Beck, a 58-year-old administrative director at a school, makes lists of gifts she plans to buy for her family and friends and sticks with it. But her spending this year will be kept in check by the high cost of food in grocery stores and restaurants, and the mortgage for a home in Minneapolis she bought last year with her best friend.That best friend, Kristin Aitchison, cannot wait for the holidays. Ms. Aitchison, 55, who works for a senior living home, advises her family each year that she plans to make the holidays smaller, spending less. And every year, she spends more than she did the year before.“I’m a huge gift giver,” Ms. Aitchison, who started her shopping in early November. “I have so much joy in giving gifts. I’m always running around the last week before Christmas because I have to find just a few more gifts.”There are many reasons for people to be more prudent in their holiday spending this year. While inflation is less rapid than it was a year ago, millions of shoppers still feel sticker shock when buying groceries. Payments on federal student loans, which were on pause during the pandemic, have resumed. And higher interest rates have meant larger credit card bills and, for home buyers, mortgage payments.Yet consumer spending has been surprisingly strong throughout 2023. For retailers, the question is whether people will continue to spend their way through the holiday season or decide this is the time to pull back.Predictions are murky. The National Retail Federation said it expected holiday sales to increase 3 to 4 percent from last year, without adjusting for inflation, on a par with the prepandemic 2019 season. But in a survey by the Conference Board, a nonprofit research group, consumers said they planned to spend an average of $985 on holiday-related items this year, down slightly from the $1,006 they anticipated spending last year.One closely watched early indicator, Amazon’s Prime Day in October, showed consumers were spending more, but only slightly. They spent an average of $144.53 on Prime Day, a 2 percent increase from the average the year before, according to Facteus, which analyzed credit and debit card transaction data.Last week, the Commerce Department reported that retail sales nationwide fell 0.1 percent in October from September, the first drop since March. Executives at Walmart also warned that consumer spending had weakened in the last two weeks in October, noting that people seemed to be waiting for sales.“It makes us more cautious on the consumer as we look into the fourth quarter,” John David Rainey, the chief financial officer of Walmart, said in an interview. “I think there’s likely more variability in the numbers.”Still, the retail sales pullback was smaller than the decline that many economists had expected after a very strong summer of spending, and some analysts saw it as a sign of continued consumer resilience.Holiday sales are likely to be decent by prepandemic standards, though not as strong as the gangbuster seasons in 2020 and 2021, said Tim Quinlan, a senior economist at Wells Fargo.Higher-income shoppers still have plenty of extra savings built up during and after the pandemic, but those with lower incomes have more fully used up their resources, Mr. Quinlan said. Higher interest rates may also deter shoppers from putting holiday shopping on credit cards. The combination of reduced savings and higher rates “makes it tougher to have a big pile of presents under the tree this year,” he said.For much of the year, consumer spending has been underpinned by continued strength in the job market and wage gains. Average hourly earnings in October were up 4.1 percent from a year earlier. That was faster than inflation. As measured by the Consumer Price Index, prices were up 3.2 percent.Those factors have helped to keep retail sales climbing on a yearly basis.It’s the Most Wonderful Time of the Year (for the Economy)Three decades of monthly retail spending show how important the holiday season is to our economy.Still, signs of slowing are beginning to show up. Wage growth is slowing, and the unemployment rate has risen over recent months. Like Mr. Quinlan, many economists think that consumers are getting closer to exhausting their savings, though some studies suggest that many have been drawing down their financial cushions only slowly.For many, the resumption of student-loan payments is putting a crimp in holiday spending plans. In a holiday survey by the consulting firm Deloitte, 17 percent of respondents said they had to resume student loan payments, and almost half of them said they planned to reduce their holiday spending as a result.In past years, Tara Cavanaugh, a 37-year-old marketing manager, spent as much as $1,500 on gifts for her family, friends and various office parties, she said. This year, after a move with her partner to Boulder, Colo., and the resumption of her $400-a-month student-loan payments — her partner also has student-loan debt — she said she was paring down her gift list and expected to spend closer to $200.Tara Cavanaugh outside her home in Boulder, Colo. She plans to pare down her gift list this year.Kevin Mohatt for The New York Times“We both make decent incomes and live simply, sharing an old car and our furniture is still from Ikea, but it still feels like we’re struggling,” Ms. Cavanaugh said of her and her partner. “I know a lot of us are feeling the pinch, so I’m not going to freak out about giving gifts to people who are older than me, are doing fine and don’t need anything.”As always, many people are looking for deals, whether on Black Friday or through other pre-Christmas sales. About 52 percent of consumers plan to watch for deals and special offers online and 39 percent plan to hunt for sales in stores this year, according to a survey by the research firm Forrester.When the Amazon toy catalog landed in Claire Kielich’s mailbox in Austin, Texas, her two daughters, ages 5 and 10, who also have birthdays in December, began circling what they wanted.“I’ll be watching to see if any of those things go on sale for Black Friday,” said Ms. Kielich, 40, who does product development and sourcing in the furniture industry. She said she expected to spend around $1,000 this holiday season and already had a stash of stocking stuffers hidden in one of her closets.Ms. Beck in Minneapolis started buying holiday gifts in July, making lists of what friends and family needed or liked, picking up unique items at local craft stores or from small local businesses and storing them in what she calls her “present drawer.” This approach, she said, helps her put more thought into her gifts and keeps her from spending beyond her budget.Her best friend, Ms. Aitchison, takes the opposite approach. While careful with her finances during the year, come the holidays she has no plan and, basically, no budget. Her oldest child has barred her from ever buying him another pair of corduroy pants. Last year, she bought four nine-foot-tall blow-up dinosaur costumes for her adult children.“Of course, nobody needs a blow-up dinosaur costume,” Ms. Aitchison conceded.This holiday season, she plans to shop until she drops.“I don’t think about what I’m going to spend,” she said. “In January and February, because I spent all my money, I’ll eat beans and rice while I pay the bills off.”Despite their different holiday shopping styles, Ms. Aitchison said she and Ms. Beck always had fun shopping together.“She doesn’t get nearly the amount of things that I do,” Ms. Aitchison said. “She’s always like: ‘Kristin stop. Put that down. You don’t need it.’” More

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    It’s the Most Wonderful Time of the Year (for the Economy)

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    For many Americans, the end of the year is a time for parties, family gatherings, festive meals and, of course, shopping. And all that holiday celebrating makes the fourth quarter the most important time of the year for the U.S. economy. 1995 2000 2005 2010 2015 2020 🎁 🎁 🎁 🎁 🎁 🎁 🎁 🎁 […] More

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    Bed Bath & Beyond Warns of Possible Bankruptcy

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    The home goods retailer said weak sales and slower foot traffic had forced it to consider options for restructuring.Bed Bath & Beyond, the beleaguered home goods retailer, warned investors on Thursday about rapidly darkening prospects for its future, saying that bankruptcy was a possible option and raising doubts that it could pull off an ambitious turnaround plan it put in place just months ago.The company could make a decision on its next steps — including whether to file for bankruptcy — within weeks, though it is possible the process will take longer, according to two people familiar with the matter who spoke on the condition of anonymity because the process is confidential.Bed Bath & Beyond, known to many shoppers for its distinctive and seemingly inescapable blue and white coupons, has struggled for years to compete with the likes of Amazon, as more shoppers have gone online for everyday home products.The retailer laid out a plan in August to turn itself around that included 150 store closings, cost cuts and layoffs. But it needs cash to execute those plans, and it is not clear that the crucial holiday shopping season brought in enough for it to continue without help from outside investors.“The company has concluded that there is substantial doubt about the company’s ability to continue as a going concern,” Bed Bath & Beyond said in a statement.Sue Gove, who became the retailer’s permanent chief executive in October, has been focused on working through a restructuring plan to improve the company’s ailing supply chain and better stock its stores. But its suppliers remain unconvinced, and it said in a regulatory filing that it was at risk of running out of cash in the coming months.“Before Christmas, there was just a glimmer of hope,” said Neil Saunders, managing director at the retail consulting firm GlobalData. “There was a view that, OK, it’s going to be difficult, but maybe they were going to pull through. Things have just got worse.”He added, “They sent out a very clear signal today that they’ve just run out of time.”Bed Bath & Beyond employed about 32,000 workers as of February and said in October that it had closed about half the stores it planned to as part of its restructuring.The company, which now has roughly 900 stores across the country, reported preliminary earnings Thursday, noting lower sales and slower foot traffic compared with the previous year. The company said its sales were about $1.3 billion for the quarter that ended Nov. 26, about a third lower than the year before, when it had more stores. The period included the run-up to Black Friday.The retailer estimated that it would record a loss of $386 million in its latest quarter, much worse than the $276 million loss in the previous year, and said it would need more time than expected to close its books. As of March, Bed Bath & Beyond had roughly $3 billion in debt.The company’s share price closed nearly 30 percent lower on Thursday, giving it a market capitalization of $150 million. At its peak in 2013, the company’s market value was $17 billion..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}What we consider before using anonymous sources. Do the sources know the information? What’s their motivation for telling us? Have they proved reliable in the past? Can we corroborate the information? Even with these questions satisfied, The Times uses anonymous sources as a last resort. The reporter and at least one editor know the identity of the source.Learn more about our process.In addition to a possible bankruptcy, Bed Bath & Beyond is exploring a number of options to shore up its balance sheet, including selling pieces or all of the company. To help with those efforts, it is working with advisers at the law firm Kirkland & Ellis, the consulting firm Alix Partners and the investment bank Lazard, the two people familiar with the matter said. Alix Partners and Lazard declined to comment. A spokesman for Kirkland did not respond to a request for comment.“No determinations have been made as of this time,” Julie Strider, a Bed Bath & Beyond spokeswoman, said in a statement regarding the retailer’s next steps.Its ability to obtain cash through those means will determine whether it needs to file for bankruptcy.Bed Bath & Beyond plans to give an update on Tuesday about its efforts to raise cash.A bankruptcy filing would give Bed Bath & Beyond the chance to shed debt and stores and emerge as a leaner, stronger company, as Neiman Marcus was able to after filing for bankruptcy in 2020. But if performance deteriorates, or its suppliers decide they will not offer their support, Bed Bath & Beyond could be forced to close, like Toys “R” Us.“What we’ve seen many times is that it ends up being a stay of execution,” Michael Baker, a retail analyst at D.A. Davidson, said. “Sometimes that works, but oftentimes you see an announcement of scaling back and having fewer stores and then that’s followed by a complete liquidation.”The attempted turnaround announced in August is being led by Ms. Gove, who at that time was interim C.E.O. after the abrupt departure of the previous chief executive, Mark Tritton, in June.But transforming a company under the burden of debt payments and the glare of suppliers that have lost their faith can be tricky. Investing in supply chains and merchandising requires money — and patience.“Transforming an organization of our size and scale requires time,” Ms. Gove said. “We anticipate that each coming quarter will build on our progress.”Ms. Gove said she had spoken to suppliers directly in an attempt to instill confidence. But they have continued to hold back, resulting in lower levels of in-stock items. Supply chain challenges made more severe by China’s tough Covid strategy have made suppliers particularly picky about the retailers they sell their product to.Bed Bath & Beyond has also been trying to win back the support of investors, who have watched as a series of activist investors, including the meme stock favorite Ryan Cohen, have pushed for changes on its board and for the company to consider selling its Buy Buy Baby brand. Mr. Cohen sold his stake in the company in August, pushing its shares down 40 percent.It has had to grapple with other turmoil. In September, its chief financial officer, Gustavo Arnal, died in what was ruled a suicide. Laura Crossen, the retailer’s chief accounting officer, has since been serving as interim financial chief.Despite Bed Bath & Beyond’s bespoke challenges, its debt worries resonate with the broader retail industry. Inflation, rising interest rates and continued supply chain challenges are probably setting up retailers up for a challenging 2023. Consumers were willing to spend this holiday season, with U.S. retail sales up 7.6 percent from the previous period of Nov. 1 to Dec. 24, according to Mastercard Spending Pulse. But how much longer that trend will last is unclear, if the economy tips into a recession, as a number of economists have forecast.And those who may look to the debt market for reprieve will probably find lenders less eager than they have been in the past two years, when interest rates hovered near zero. Lenders that were previously willing to put money into riskier companies like Bed Bath & Beyond may no longer be willing to take that bet. Supply chain issues worldwide mean companies have less product, not only to sell to customers but to offer lenders as collateral.For a company in as much financial trouble as Bed Bath & Beyond, “it’s very difficult to raise new capital, but it’s also difficult to get your current capital providers to want to play ball for a longer period of time,” said James Gellert, the chief executive of the financial analytic firm RapidRatings International.That makes it “really hard for a company like them to claw out of the position that they’re currently in.” More

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    Retail Sales Fell 0.6% in November, Despite Black Friday

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    Inflation changed the way U.S. shoppers approached the holiday season, while lower gas prices and a decline in car sales were also factors.Retail sales fell in November, with spending on even traditionally popular gift categories like clothing and sporting goods declining, a sign that high prices for necessities like food are affecting how people approach the holiday shopping season.U.S. retail sales fell 0.6 percent in November from October, the Department of Commerce said on Thursday. The figure does not account for price changes, and inflation did ease slightly during the month.Spending increased in some areas, including at grocery stores, health and personal care stores and restaurants and bars. But categories like motor vehicles, furniture, consumer electronics, clothing and sporting goods all declined. Gas prices also fell during the month, meaning consumers spent less money filling up their cars.“Overall, the demand patterns — not the most academic term — have been out of whack for the past few years and what we’re seeing is these disruptions coming back in these forms,” said Andrew Forman, who studies consumer behavior at Hofstra University’s Frank G. Zarb School of Business. “There are so many moving factors.”Inflation in November slowed to 7.1 percent through the year, down from 7.7 percent in October. Some analysts pointed out that lower prices affected the retail sales figure.“Less inflation is driving some of that decline from October to November, which wouldn’t be a bad thing,” David Silverman, a senior director at Fitch Ratings, said.In many ways, the report highlights how inflation, even if it has eased, has changed the way consumers are approaching the holiday season. Americans, for example, are whittling down the number of people they are giving gifts to, according to data from KPMG.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Why Retailers Are Trying Extra Hard to Woo Holiday Shoppers

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    With an economic slowdown a distinct possibility, stores hope customers’ willingness to open their wallets will last through the season.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 Legoland 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.”An Express store at the Tanger Outlet in North Charleston, S.C. To entice bargain-hungry shoppers and move unwanted inventory, many companies are promoting “value.”Gavin McIntyre for The New York TimesForecasters 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 percent 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.And a University of Michigan survey this month showed a sharp decline in “consumer sentiment” — a measurement of how people feel about the economy and their financial situation. Even as consumers continue to make purchases, Ms. Boussour said, “they’re feeling depressed about the overall economic situation, and they are going to grow increasingly reluctant to spend.”An employee at Bath & Body Works at Tanger Outlet greeted Black Friday shoppers. Forecasters generally expect that consumer spending will remain strong in the fourth quarter, largely because of household savings.Gavin McIntyre for The New York TimesRetail sales grew 1.3 percent in October, more than expected, as shoppers snapped up earlier-than-usual holiday deals. Some major retailers including Walmart and Home Depot reported strong third-quarter earnings, bolstered by sales for less discretionary goods like groceries or items related to home renovation and do-it-yourself projects. “Households are still spending money because they can,” said Aneta Markowska, chief financial economist at the investment bank Jefferies. “I still think there’s a lot of uncertainty about next year because the Fed obviously has raised rates very aggressively this year and we haven’t really felt the effects yet.”But several retailers said they saw demand for their products slow during the month, and when shoppers did buy, they seemed motivated by sales. Some companies have lowered their financial outlook or declined outright to provide forecasts for next year to avoid being caught flat-footed.This was not how the end of this year was supposed to be. For two holiday shopping seasons, retailers strained against pandemic disruptions. Now that the virus restrictions and supply chain snarls that defined those periods have largely abated, retailers had been expecting something of a return to normal.Instead, retailers find themselves trying to outrun a likely economic slowdown.To entice bargain-hungry shoppers and move unwanted inventory, many companies are promoting “value,” offering steep discounts and low prices more so than last year even as labor costs remain high. Many started their holiday blitzes early in the hopes of jump starting sales. Target held Deal Days in October and Old Navy rolled out a “Sorry, Not Sorry” holiday campaign. “Value clearly matters to everyone,” Corie Barry, the chief executive of Best Buy, said on an earnings call last week.J.C. Penney brought back doorbuster sales on Black Friday aimed at getting shoppers back into the store.Justin Hamel for The New York TimesAt J.C. Penney, stores returned to 5 a.m. doorbusters on Black Friday, promoting the “pre-inflation pricing” for items like Instant Pots, hair flat irons and coats.Jeff Gennette, the chief executive of Macy’s, said that a feature on its website that allows users to peruse gifts priced from $15 to $100 seemed to be particularly tempting to shoppers.“If you’ve got an item that’s competing with the competitor, and you’re a higher price, you’ve got to make those adjustments,” he said.Retailers are trying to eliminate any obstacles between a shopper and a potential purchase. Jill Timm, the chief financial officer for Kohl’s, said the chain was providing more personalized offers to shoppers, as well as clearly laying out the discount amounts on certain items to prevent customers from being confused “because they had to do math.”Kohl’s is “really making sure that the offers that we’re putting in are meaningful to the customer to drive their behavior,” Ms. Timm said.Signaling value is part of the overall strategy for Primark, an international clothing retailer, as it looks to grow its presence in the United States.In a recently opened store at a mall in Garden City, N.Y., Primark executives pointed out large signs that advertised $11 hoodies, $4 biker shorts and $20 for a baby-blue bag featuring Stitch from the Disney movie “Lilo and Stitch” — and noted that a candle, at 90 cents without any holiday discount, cost less than at Walmart.“It needs to be a very clear moment when you walk in of that perception that there is amazing value throughout the whole store,” said Kevin Tulip, Primark’s U.S. president.Shoppers seemed price conscious on Black Friday and throughout the weekend.Retailers dropped online prices for merchandise like toys, electronics and computers, according to data released on Friday from Adobe Analytics. Discounts for sporting goods and TVs were far steeper this year than last year, according to Adobe data, and clothing prices were slightly lower this year. The average discount for Black Friday deals in the United States was 30 percent, according to Salesforce. In 2019, Salesforce said, the average discount rate for Black Friday was 33 percent.In-store sales on Friday rose 12 percent from last year, and e-commerce sales increased 14 percent compared with 2021, according to Mastercard SpendingPulse data released on Saturday. Those sales included spending not just in retail stores but also at restaurants.Still, not everyone was satisfied. On social media, people complained that Black Friday deals weren’t as sizable as they expected.In San Francisco, Riz Gordon, 24, woke up at 6 a.m. on Friday to shop with her parents and younger sister. Going to the stores that day is “a long family tradition,” she said, and they had already picked out stocking stuffers and smaller presents. But inflation was on their minds.“The prices are very much different than 10 years ago,” Ms. Gordon said.On Sunday, at a Target in Springfield, Ill., D.J. Baggerly, 69, made a quick trip for one final Christmas gift: a white knitted throw blanket. She had spent the weekend mostly shopping online, working through her grandchildren’s wish list.Ms. Baggerly lives on a fixed income, and the higher prices for gas and groceries, she said, have been “ridiculous.” Asked if she planned to cut back on spending in the coming weeks, she said, “Oh yeah. I’m done.”Ben Casselman More

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    Black Friday Shoppers Worry About Economy as Retailers Push Sales

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    Black Friday deals returned, drawing shoppers back into stores, but inflation worries left many companies unsure what the holiday shopping season would look like.After two years of pandemic improvisation and in-store restrictions, this year’s Black Friday felt like a return to normalcy.Shoppers who ventured out on Friday, and even those who didn’t, saw a deluge of deals that had been missing the past couple of years. Many retailers pushed lower prices both in stores and online in response to Americans having recently shown they were more than willing to wait for a discount before making a purchase.“I think we’re going back to what we had before the pandemic with what we’re offering on Black Friday,” said Stephen Lebovitz, the chief executive officer of CBL Properties, which owns about 95 properties, including shopping centers and malls across the United States. “There are changes, but it’s going to feel a lot more like 2019 Black Friday than anything in the interim years.”Still, near-record inflation and dwindling savings kept some shoppers home and left retailers unsure what the season would ultimately bring.Many well-off consumers remain stable financially and appear ready to spend, but others face far more economic uncertainty. That isn’t expected to change anytime soon. Analysts, economists and retail executives are monitoring a potential economic slowdown in the first few months of 2023 that could worsen consumers’ wariness.That makes the holiday season — always the most important time for retailers — even more crucial this year.As the day began at Macy’s Herald Square, the department store’s flagship location in Manhattan, there was a steady flow of customers, and store employees clapped as people entered. Some said they were excited to shop but had concerns over prices.Shoppers who entered the flagship Macy’s location in Manhattan were greeted with applause from store employees.Mathias Wasik for The New York TimesTammy Freeman, 59, from New York, stood at the front of the line near the store’s main entrance, ready for her annual Black Friday excursion. She said that she was eager to buy various items, including a case for her daughter’s laptop, but noted that inflation was changing her general approach to spending.“I have to budget more,” she said. “I have to catch the sales more.”Eighty percent of holiday shoppers are likely to make a purchase from Black Friday through Cyber Monday, according to a survey from Bankrate. People shopping online pulled out their wallets on Thanksgiving Day as well, with sales up 2.9 percent compared with a year earlier, according to Adobe Analytics, which tracks online sales. Adobe estimated that online spending for the holiday season would increase 2.5 percent from last year. It said it had calculated that online prices were down 0.7 percent in October compared with last year, largely because of early holiday deals, though they rose 0.3 percent from September.On Friday, bargain-hunting shoppers definitely seemed to have the power. Stores posted signs advertising 50 to 60 percent off items. At a Target in Springfield, Ill., shoppers walked around with 65-inch televisions in shopping carts, and some wore matching T-shirts that said “Gather, gobble and shop.”In San Francisco’s Union Square, it was relatively quiet. By 7 a.m., when the line outside Macy’s had dissipated, it felt “more or less like a normal day,” said Clifford Cheng, a retail associate at the store.At a nearby Neiman Marcus, only about a dozen shoppers waited outside ahead of the store’s 9 a.m. opening. Natali Carrasco, 20, and Batechaa Steele, 20, were first-time Black Friday shoppers at the luxury department store.“We always come and shop here, but we always buy full price, so we wanted to see the sales,” Ms. Carrasco said.Shoppers have already cut back on some discretionary purchases, leaving many retailers with excess inventory.Nic Antaya for The New York TimesEven before the start of the season, some shoppers were already cutting back on discretionary purchases, leaving retailers with an unusually high level of inventory. They want to unload as much of that as possible before the start of the new year. “The more sales merchandise that they move through now the better,” said Kristen Gall, president of the online platform Rakuten, which offers cash-back deals. “Because if you get caught holding a lot of inventory in January and February and consumers pull back because things feel significantly more recessionary, that’s where the worry comes in for retailers.”Despite the economic unease shoppers have expressed, retailers said they were optimistic.“Even in really tough years Black Friday is a very strong day for us,” Jeff Gennette, Macy’s chief executive, said in an interview.And there were promising signs. Forty percent of consumers said they planned to shop in malls this holiday season, higher than the 35 percent of consumers who did during the 2019 Christmas season, before pandemic lockdowns, according to a survey from the consultancy KPMG. Last year, the number of shoppers who said they planned to venture inside a mall was 31 percent.Americans were also still purchasing gifts online. Adobe said online sales for Black Friday were expected to total $9 billion, up 1 percent year-over-year..Retailers took different approaches to entice shoppers to spend. Macy’s did not bring back the opening doorbuster deals — which went away during the pandemic amid social distancing guidelines — and instead offered sales throughout the day. It also continued the pandemic-era tradition of having Santa take photos with children while seated behind a desk, a sign that Covid concerns remain.J.C. Penney leaned back into doorbusters for the first time since 2019 because it said it wanted to motivate discount-focused shoppers to get out to stores. For its 5 a.m. doorbusters, the department store chain deliberately kept “pre-inflation pricing” on key items like Instant Pots, bath towels and boots. Signs in stores trumpeted 65 percent off discounts. Shoppers lined up outside the J.C. Penney in El Paso, Texas, before it opened at 5 a.m, on Friday.Justin Hamel for The New York Times“We think we’ll have a big volume of customers at the store, and to bring them in we know that value is very important to the consumer right now,” said Marc Rosen, J.C. Penney’s chief executive.On its website, the mall owner CBL highlighted the discounts that stores like H&M and the children’s apparel retailer Carter’s were offering. Other retailers employed a similar strategy in the days leading up to Black Friday. J. Crew on Monday advertised 50 percent off purchases. On Gap’s website, a large black banner scrolled atop the page saying “HPY BLK FRI” and highlighting 50 percent off deals with an additional 10 percent markdown.There are risks for retailers, however, in relying more heavily on deals. The practice erodes profit margins that buoyed them during the pandemic, when many Americans spent plenty on all sorts of goods and retailers did not feel the need to entice them with too many deals. There are also worries that shoppers will become so accustomed to sales that they will only buy when promised a lower price.“Consumers understanding that they can wait out discounts, coupled with retailers’ drive to move goods, likely means that this Black Friday will be more important than Black Friday has been in a long time,” Simeon Siegel, a managing director at BMO Capital Markets, said. “Whether that’s good for the brands, whether that’s good for the consumer — that’s a separate conversation.”Retailers are also competing more with entertainment options, like concerts and dining out at restaurants, than they have in the past couple of years. Consumers are expected to allocate a larger share of their holiday spending on experiences this year compared with last. The average amount that middle-income Americans, who make between $50,000 to $99,000 annually, spend on experiences is expected to increase 15 percent this year, according to a survey released in October from Deloitte.Of course, not every retailer places so much importance on Black Friday.The outdoor equipment retailer REI has remained closed on the day since 2015. This year, the company said it had decided to permanently give its workers a paid day off on Black Friday, encouraging them to spend time outside instead.But that was the exception. Even while the total sales for Black Friday were still being tallied, many retailers were already looking to further entice shoppers by rolling out advertisements for more discounts on Monday.“We believe that the consumer is quite aware of the fact that there’s plenty of inventory out there,” Richard Hayne, the chief executive of Urban Outfitters, said on a call with analysts this month. “And what they’re doing is waiting for big promotional events that normally occur on Black Friday and Cyber Monday in order to make their purchases.”Retailers may need to offer more deals, he said, but “I don’t believe it will be a total blood bath.”Isabella Simonetti More

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    Billions of Dollars at Stake in a Puzzling Holiday Shopping Season

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    It promises to be unpredictable, with retailers and consumers still figuring out how much will be spent and on what kinds of goods.No one quite knows what to make of this year’s holiday shopping season. But billions of dollars are riding on it.After two pandemic holiday seasons messed with doorbusters, party plans and supply chains, retailers were hoping that this year would be a return to sanity. But just as it started to appear that families and stores could pull out their old playbooks, along came near-record inflation and the war in Ukraine, only increasing general unease about the state of the world.Some things are looking up. The pandemic has receded, supply chains generally stabilized, and the labor market is strong.But in March, the Federal Reserve started raising interest rates to slow down inflation, just as retail executives were making plans for which toys, wreaths and fuzzy socks shoppers would buy come winter. To try to ensure a robust shopping season, retailers leaned in early and often. Christmas trees showed up at Costco in August. Amazon threw what amounted to a second Prime Day in October. And it seems every day has brought ads for Black Friday deals, like the ones that Target offered throughout October.Still, shoppers seem confused. Should they buy now or later? Purchase for a lot of people or put a priority on a few? Give items or shared experiences? Trust online deliveries or go with local shops?“The truth is, we don’t know whether consumers will spend more or less on gift giving or whether they’ll do more shopping online or in the mall,” Etsy’s chief executive, Josh Silverman, told investors recently.That has left companies making predictions for the all-important retail season that amount to a shrug.“We’re not quite sure how strong holiday spending will be versus last year,” Brian Olsavsky, Amazon’s finance chief, told investors in October, “and we’re ready for a variety of outcomes.”Or, as Peter Boneparth, the chair of Kohl’s board, told analysts this month, “I think everybody believes that Christmas will come, but I don’t think anybody out there knows for sure exactly what’s going to happen.”Feeling inflation’s squeezeMathias Wasik for The New York TimesInflation is on everyone’s mind. Higher prices on all sorts of items have made people rethink what they’re buying and whom they’re buying for. While inflation is moderating slightly, it’s at the highest levels since Indiana Jones was bullwhipping raiders of the Lost Ark at the mall cineplex.More on Big TechMicrosoft: The company’s $69 billion deal for Activision Blizzard, which rests on winning the approval by 16 governments, has become a test for whether tech giants can buy companies amid a backlash.Apple: Apple’s largest iPhone factory, in the city of Zhengzhou, China, is dealing with a shortage of workers. Now, that plant is getting help from an unlikely source: the Chinese government.Amazon: The company appears set to lay off approximately 10,000 people in corporate and technology jobs, in what would be the largest cuts in the company’s history.Meta: The parent of Facebook said it was laying off more than 11,000 people, or about 13 percent of its work forceThe National Retail Federation predicts that holiday sales in November and December will increase 6 to 7 percent from last year, but that’s below the rate of inflation.“Folks are really looking for deals this year,” said Melissa Burdick, who spent a decade at Amazon and founded Pacvue, which helps big brands sell online. “They’re shifting what they’re buying to favor lower-priced brands and more necessary items.” She summed up the sentiment as: “I used to want Bose headphones. Now I will buy chips on sale on Amazon.”Cristian Tinoco, 19, who works 45 hours a week at a gym in Seattle and attends community college, said his family would focus on spending Christmas together after a rocky year.“Gas has especially gone up. I probably spend about $400 a paycheck on gas because I commute 35 minutes each way, each day. I have three siblings, so my parents have four kids at home and spend more than $1,000 a month on groceries. I help sometimes pay for food with my paycheck.“My student loan application got messed up, so I’ve been paying for college out of pocket. I don’t want to drop out. I may finally be able to start saving. I want to buy a truck — it just feels like me.”The experience is the thingPeople spent two pandemic years buying stuff. With stimulus checks, rising wages and nowhere to go, last year’s holiday season generated the biggest annual growth in retail spending on record — 14.1 percent.This year, Covid-19 travel restrictions have eased, and masking mandates are virtually gone. Retailers are bracing to lose out on spending as more people go on trips, attend concerts and eat out.The Transportation Security Administration said screenings were up 33 percent from last year, and concert bookings are up 51 percent, according to Eventbrite.“They were reminded that life is very short, and coming out of this pandemic they want to experience life again,” Mike Daher, an executive at the consultancy Deloitte, said.Mary Anna Ball, 25, a ballerina and research analyst in West Virginia, usually starts squirreling away Christmas gifts in July but this year wants to give gifts that will help her family experience the world.“I love sweaters and little kitschy things like that, but I know not everyone is that way, and you’ll kind of remember the experience more than when you’re going through your clothes of, ‘How did I get this sweater?’ If you give an experience, that’s something you’ll remember a bit longer, or maybe it’ll introduce you to a new hobby or something like that.“I have two younger brothers. Some people get siblings tattoos. I refuse to do that. But they’ve said it would be fun to go skydiving one day. I thought, I can get them a voucher and, whenever they can, they can just go down and skydive or something.”Christmas came early in many storesMathias Wasik for The New York TimesGetting what you want this year shouldn’t be a big issue. Remembering last year, when popular items were stuck at ports or somewhere in the Pacific Ocean, brands ramped up production, and retailers ordered more products. They did this earlier than usual to make sure items arrived on time, but the supply chain improved. When orders arrived earlier than expected, retailers piled items in warehouses that in some cases were already stuffed with merchandise ordered in 2021.That, combined with uncertain consumer demand, left retailers with record-high inventories, according to data from the Census Bureau.That’s leading to more deals and a hodgepodge of goods on store floors, no matter the season. In other words, Christmas came early to stores.Mike Campese, a guitarist and instructor in Las Vegas, knew this year was going to be strange when he saw holiday merchandise unusually early.“The other day, I was in Costco, and as soon as you walk in, the very first aisle is the Christmas stuff. It is still September! Oh, my God.“It is the earliest I have seen it. Usually the day after Halloween it’s like the malls are playing Christmas tunes and the decorations are up. Some people go shopping in September. I can’t do that. I am not in the spirit yet.”Waiting on deals, even for everyday itemsAmazon tried its best to hype an early holiday sale at the start of October. Some of the top-selling products in the United States — like Crest Whitestrips and protein powder — weren’t exactly typical presents.“No one is buying gifts for Christmas,” said Jason Murray, an Amazon veteran whose company, Shipium, advises online retailers. “They are buying for themselves.”It doesn’t matter much to retailers, who used the early holiday sales to try to offload products before most shoppers had even picked out their Halloween costumes. But it signaled that shoppers are motivated by deals, no matter what they’re for. After two years of limited discounts, shoppers are showing they are willing to hold out for a bargain.Brands are getting on board. “We made too many,” the bike maker Specialized said on its website, telling customers that they can “save BIG.”Rakuten, an online platform that offers deals and shopper rewards, said retailer participation in Black Friday and Cyber Monday promotions was the “biggest in the last three years.”Natalie Rodriguez, 47, who works for the Indiana Department of Revenue, said the products on sale weren’t what she wanted to give for Christmas.“I am really cognizant of those deals that are coming up right now. I think it is a grab to see who gets my money first. Am I taking advantage of it because I perceive it was a deal?“On the Amazon sale, I had 150 things in my cart and saved for later, but I didn’t see anything that is comparable to what I would think is a Black Friday deal. When I was a kid, Black Friday was superlow-cost, like 80 or 90 percent off. Most of what I saw was 30 and 40 percent on some items. It’s like, ‘Nah, I will just pass,’ especially if it is not an essential item. Crest Whitestrips were a great deal, but I don’t need them right now.“All I got was a $50 gift card with a $10 bonus on it.”On-time arrival, finallyFor years, largely spurred on by Amazon, consumers got used to fast shipping — often in two days or less. The pandemic upended that. Driver and inventory shortages meant people had to plan ahead.This year, industry experts do not expect another Shipageddon. There are more than enough delivery and warehouse workers to meet demand. Shippers should be able to deliver 110 million packages a day, almost 20 million more than shoppers are expected to order, according to ShipMatrix, a consultancy.“Because of experiences of what has gone on with global supply chains in the last few years, folks are stretching the holiday season over a longer period,” said Jamil Ghani, the vice president of Amazon Prime.Miranda Rosas, 21, a student at the University of California, Merced, was nervous about late-arriving Christmas gifts, so she started ordering last month.“Shipping last year was so awful, and a lot of items that I ordered a little bit last minute came in time, thankfully, but it took a long time. I tried to start a little sooner.“I really thought that it was going to take a couple weeks or a whole week and then it would ship and then it would take another two weeks to come. Now, a lot of my stuff it’s been like, ‘Oh! Already?’”Luxury is its own thingMathias Wasik for The New York TimesThe vibes are good for people with money to spare.More than three-quarters of luxury shoppers say they plan to spend the same as or more than last year, according to a survey from Saks. Twice as many as last year said they planned on dressing up in formal attire for the holidays, and 40 percent wanted to “self-gift” shoes. Luxury goods companies are giving signals that they’re confident about the U.S. market. This month, Estee Lauder agreed to buy Tom Ford for $2.8 billion, widening its reach into fashion apparel.“Customers are going back to a social life,” said Geoffroy van Raemdonck, chief executive at Neiman Marcus, whose top customers spend an average of $25,000 a year with the brand. “This is one of the first holidays that they feel more comfortable sharing it with their loved ones. I think that there’s a lot of good things coming with the holiday.”Sabah Essa, 49, a style adviser at Neiman Marcus in Atlanta, has been working with her clients, who include doctors, housewives, reality-TV stars and young professionals, to build their holiday wish lists.“Mostly everyone wants a big expensive piece compared to last year. For example, someone maybe got a Prada bag last Christmas, and now they’re upgrading it to high-end jewelry.“They want to find an outfit for going out to dinner or a party or birthday or to grab a gift for another friend. Everybody is just really happy to go out, and they can go without a mask.“A lot of them are also traveling. They want their suitcase to be all new stuff.“One client wants to give his wife 30 different gifts for her turning 30. He wants to have that plus Christmas because her birthday falls right around Christmas. The gifts are all different ranges, from stocking stuffers to high-end jewelry to Chanel bags to shoes — a lot of shoes, from sneakers to heels to boots.“It helps that we offer our clients a glass of champagne when they come in to make it easy for them to shop. Or if they want a cup of tea or coffee. It’s more fun than the years in the past now.”Interviews have been lightly edited for clarity. More