Black Friday And Cyber Monday Sales Records? Maybe Not.

 

Since Thanksgiving, the headlines have continually referenced “record” sales on Black Friday, record online sales on Thanksgiving Day itself, and new highs in sales on Cyber Monday. This article is a good example.

It touts a record $9.12 billion of online sales on Black Friday and says such sales were “up 2.3% year-over-year.” Cyber Monday online sales are estimated at $11.2 billion, up 5.1% year-over-year, according to the article.

Here’s what they’re not telling you. Inflation is running at 7.7% year-over-year, according to the most recent data. The annualized inflation rate has been running even hotter in prior months, including 9.1% in June, 8.5% in July, 8.3% in August, and 8.2% in September.

The sales figures and “records” you keep reading about are expressed in nominal dollars. In order to convert to real dollars, you have to subtract inflation from the number presented.

For example, the 2.3% gain in Black Friday cyber sales is actually a drop of 5.4% adjusted for inflation. The 5.1% estimated gain in Cyber Monday sales is actually a drop of 2.6% adjusted for inflation.

Real inflation-adjusted sales are going down steeply at rates typically associated with a recession. There’s a lot of other data to support a recession hypothesis, including declining savings, declining real wages, and increases in credit card balances that are non-sustainable because the cards have limits and the sky-high interest rates eat consumers alive.

How will consumers pay off credit card balances with 20% interest if real wages are declining 3% on an annualized basis? They won’t.

We haven’t seen this kind of inflation in the U.S. since the late 1970s. I lived through that episode (which actually lasted ten years from 1975 to 1984) and remember it well.

Most analysts and investors under the age of 50 have no recollection of what that was like. In fact, most were not even born then. They’re inexperienced or a bit out of practice when it comes to making inflation adjustments to hard data.

Just bear this in mind the next time you see a happy talk headline about some spending record. It may just be an inflation mirage.

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