By Quentin Fottrell
American shoppers seem to feel more bounce in their step, rising consumer confidence numbers show. But experts say even after a better-than-expected Black Friday turnout, it’s going to take big discounts to get recession-scarred shoppers to part with their cash. “The tougher the economic conditions, the more price sensitive consumers are and the higher the margins that retailers are willing to give up,” says Odysseas Papadimitriou, CEO and founder of CardHub.com.
The good news for retailers: Consumer confidence for November leaped to 56 – above expectations of around 45 and up from a revised October in 40.9, according to the Conference Board. The figure is watched closely by both retailers and economists as a key indicator of how Americans are feeling in the crucial five weeks before the holidays – the busiest shopping season of the year. Some say consumers will need a push to open their wallets. “We could see record-high holiday sales this year with razor-thin profit margins,” says Mark Perry, visiting scholar at the American Enterprise Institute in Washington, DC.
The economic backdrop is still a worry: high unemployment at home and an escalating debt crisis in Europe. “The economy is still weaker than many people had hoped and consumers will have an expectation that prices will also be lower than last year,” says Doug Lockwood, chief investment officer for financial advisory group Hefty Wealth Partners in Auburn, Ind. “While consumer confidence may have risen, we’re still a long way off from splurge buying for the holidays,” says Sherif Mityas, a partner at Chicago-based consulting group AT Kearney. “Consumers are still buying mostly on deals and off their shopping lists.”
Then why the spike in consumer confidence? Even with a relatively high 9% jobless rate, it’s down from around 9.8% a year ago, and the private sector has been adding new jobs at an average rate of 150,000 jobs each month for the last year, Perry says. “For the 91% of Americans who have a job, it’s a great time to be a consumer,” he says. “Interest rates are at historical lows for those purchasing cars or homes, and intense retail competition translates into rock-bottom prices for consumer goods like electronics and computers as we saw with sales on Thanksgiving weekend.”