Sherie Cobb and Becky Hind got up at 3:30 a.m. for their Black Friday shopping spree in Bellingham, Wash.
The sisters arrived at the Bellis Fair mall at 4:30 a.m., ready to shop till they dropped. Ms. Cobb, 43, and her husband Brian recently refinanced their home in Ferndale, Wash., enhancing the cash flow for themselves and their two kids.
Their home was reappraised at a higher value, allowing them to chop their monthly mortgage payments to $1,050. Aided by an interest rate reduction, they are now saving $450 a month in mortgage payments. Not only did Ms. Cobb and Ms. Hind have hundreds more dollars to spend on shopping, they were also drawn to deep discounts. They snagged a porcelain statue of a parrot for half price and landed deals on clothes from J.C. Penney and other retailers for up to 70 per cent off.
“Slowly, people are starting to open their wallets,” said Ms. Cobb, who works in a physiotherapy office.
They’re not the only ones in a more buoyant mood. After years of false starts, the U.S. economy, and its people, are finally getting their momentum back.
The evidence isn’t just in the crowded lineups of frenzied Black Friday shoppers. It is in rising house prices and healthier housing starts, booming car sales and sturdier job creation.
Consumer spending is the engine of the US, accounting for 70 per cent of economic activity. However, since the recession and housing crash that began in 2008, the debts of U.S. consumers have weighed down spending.
The arrival of Black Friday – so named because it marks the day retailers hope to move into the black, or profitability – is a key moment in determining the health of consumer spending.
Caveats abound: Some of that orgy of spending is merely drawn from other months, the effect of online shopping is unclear and the increase in the number of shopping hours further blurs the picture. But as one of the busiest shopping days of the year, Black Friday is a key gauge of how consumers are feeling about their prospects.
The world’s largest economy is finally shifting out of neutral – and that shift is boosting consumer confidence, with sentiment now rosier than at any point since the recession.
David Kelleher, who runs a Chrysler dealership in the Philadelphia area, is witness to the new verve of the American consumer. He’s seen a steady increase in demand for sedans and jeeps – not in the low end, but models priced in the high $40,000 range. “The people we see in the showroom are comfortable with their place, they feel that the worst is behind them so they don’t feel like they’re going to slip backwards,” he says.
He sees higher sales ahead as consumers shrug off election jitters this year, and a more stable economy fuels demand next year.
It’s not just talk. He’s breaking ground in March on a $1-million renovation to expand his facility – “with full confidence” – to make space for more salespeople, new cars and services. He sees double-digit growth in sales and services next year, and plans to hire at least 10 people to meet demand.
In fact, the outlook for the U.S. economy “is stronger now than at any point in the last three or four years,” says Harm Bandholz, chief U.S. economist at UniCredit Group in New York. “From a broad perspective, things are getting better.”
He’s no Pollyanna. For the past three years, his views have been bleaker than other forecasters because of his concern over debt loads. Several reasons explain his new-found optimism – the chief one being housing. Prices and construction are picking up, which is turning the sector from a “headwind to a tailwind.” Consumers are confident enough that they’re spending again, buoyed by feeling wealthier from rising home prices. And the jobs market is mending, with the pace of layoffs subsiding.
Surveys show households are less pessimistic on their job prospects and feel an increased sense of security, he adds. Uncertainty about the fiscal cliff is casting a cloud over both businesses and consumers – but a resolution there will have a dramatic impact on capital spending and juice the stock market, he believes.