Westpac also asked consumers whether they planned to spend less, the same or more on Christmas gifts than last year, and nearly 40 per cent said they were planning on spending less.
That was similar to last year’s results, according to the bank’s senior economist Matthew Hassan, which was the most pessimistic result since Westpac began asking that question in 2009. In other years, about a third of people planned to spend less on Christmas presents.
EY’s consumer index also showed shoppers intend to spend less over the silly season than in previous years.
In October 2021, 18 per cent intended to spend less during major sales events such as Black Friday, but that reached 33 per cent in September this year. The proportion of people intending to spend more also fell, from 22 per cent in October 2021 to 20 per cent in September 2023.
EY chief economist Cherelle Murphy says negative sentiment is not in and of itself necessarily evidence that consumers will not spend, but the increased pressure on household budgets meant an explosion in spending was unlikely.
“We have many reasons to expect that this Christmas will be softer in real terms than last year,” she says.
The other factor feeding into the plethora of sales is the businesses themselves.
Sales are a good way to offload all that inventory, says Pradeep Philip, head of Deloitte Access Economics. Some businesses may have built up a surplus of stock, and they are also worried about the next few months.
Plenty of stores will just be trying to get some cash flow. Shoppers have continued to pull back spending on non-essentials, and most are becoming more bargain-conscious.
“Consumers are chasing value in a very, very deliberate way, and that happens to be at a lower price,” Philip says.
With consumers wanting to spend less and ensure they get a bargain in the process, businesses are having to compete aggressively for those precious dollars.
That’s partially why many Black Friday sales have started early – businesses want to get in early and attract shoppers before they exhaust their holiday spending budget.
So it’s unlikely that Black Friday sale shoppers will give the Reserve Bank reason to raise interest rates further in December.
Murphy says that’s because people are more likely to be changing when they spend, rather than spending more overall. Instead of buying some goods in the November sales and buying more ahead of Christmas, we’re likely to do all our seasonal shopping in one hit.
In that case, the Reserve Bank will want to see the December spending figures before making up its mind about whether the November sales were super-strong.
A blip in spending in November also does not mean consumer demand is rising, and Philip says the Reserve Bank should be able to look through that temporary shopping spree and concentrate on other factors including what inflation pressures look like over the horizon.
Given all that, I think I’ll still buy those headphones (and maybe the hairdryer too) – but only if I can get them on at a discount.
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