It seems like only yesterday it was Christmas, and hopes were high for a better fiscal holiday season than the last few. After all, the reports kept saying that we were experiencing a recovery from the recession, jobs were up, and more people had disposable income to work with. This, in theory, would boost us even further and help us to achieve the kind of stability that we could only dream of a few years ago.
However, the numbers for the holidays were not nearly as high as economists would have liked. In fact, Black Friday sales were down by almost 1.2 billion, though there was some recovery towards the end of the season with a number of last-minute and online purchases. But why does holiday retail matter so much? Why should the average consumer care how many people broke down doors trying to buy the newest talking doll or video game system for their kids?
As it happens, the holiday sales season is closely linked to the market and its success. One of the major reasons for this is the simple fact that retail makes up the largest portion of our GDP by far, at about 70%. With such a huge amount of our efforts focused on only one sector, we’re bound to care about how that sector does. Unfortunately, this same industry makes most of its money at one time of year – the holidays. Which means, essentially, that we’re crossing our fingers every Black Friday to see how the country does financially for the year.
Some may argue that this, in itself, is a recipe for disaster and that we should diversify. However, until such time as another industry begins to have a greater sway on our GDP, we have to focus on meeting our yearly and holiday sales goals.
Of course, there will be other factors involved in the intake for the year, and the state of the economy itself works in a rather cyclical fashion with regards to retail. For instance, if many people only have enough money to get by, they’re not going to be spending a lot over the holidays; likewise, those who are worried about the future of the economy, their job security, and the stock market, are not going to want to rack up hundreds or thousands of dollars in credit card debt.
When these people don’t spend during the 4th quarter, businesses don’t get the income they were counting on. These companies don’t hire as much that year, and may even have to fire some workers, cut benefits, and even rescind customer discounts; these people, in turn, can’t buy as much. The cycle continues.
But why? Supposedly, things are looking up. Gas is cheap, more people are working, and the country is doing better. As financial analyst Dawn J. Bennett would be quick to tell you, there is no confidence in the system because several signs are pointing towards another recession. Time will tell, however, whether our underwhelming holiday numbers are a herald of this.