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opinion

A family loads a TV into a pickup truck outside a Walmart on Black Friday in El Paso, Texas on Nov. 25.JUSTIN HAMEL /The New York Times News Service

Gus Carlson is a U.S.-based columnist for The Globe and Mail.

There’s some head-scratching going on among retail experts this week as they try to make sense of the strong sales at U.S. stores on Black Friday and record-setting online sales on Cyber Monday.

The recurring question: What inflation?

Shoppers’ enthusiastic spending to kick off the holiday season has defied the gloomy mood set by a well-worn list of data that has weighed on the U.S. economy for some time.

Inflation is at 40-year highs, with steep prices for gas, food and other staples, and rising interest rates are making everything from mortgages to car loans more expensive. Yet retail sales over the U.S. Thanksgiving long weekend topped US$9-billion, and Cyber Monday sales of more than US$11-billion set a new record. The National Retail Federation expects the good times will continue, predicting holiday sales this year will rise as much as 8 per cent from a year ago.

The trend is both counterintuitive and a bit scary. And there’s a catch: To pay for the binge, consumers are dipping into their savings at record levels, racking up significant debt on credit cards and taking advantage of buy now, pay later schemes like never before, with participation in such plans up an estimated 80 per cent from a year ago.

Where is this devil-may-care attitude coming from? Some experts suggest it reflects the triumph of a psychology linked to the pandemic. Simply put, people want to live their lives again, and they will find ways to pay for it, even if it means taking on debt.

“People want engagement again,” said Tim Ceci, a New York-based consumer and retail expert with Point B consultancy. “The same way people are coming back to restaurants and theatres and museums again, people are returning to stores, too. Retail is coming back.”

Mr. Ceci, who once worked for Nordstrom and Barneys New York, pointed to encouraging signs of strength in the apparel segment, where service took a beating during pandemic lockdowns.

“People want to try things on and they want feedback from knowledgeable salespeople,” he said. “The people part of this comeback is really critical.”

So critical, he suggests, that retailers who focus on training and rewarding employees will do much better in meeting the returning demand for service. “The better the employee experience is inside, the better the customer experience.”

Mr. Ceci is particularly encouraged by the return of life in U.S. cities, which is lifting all businesses, including retailers. In New York, despite well-publicized crime issues, the vibrancy is picking up. Office occupancy is above 50 per cent for the first time since the pandemic, and tourism is strengthening.

Interestingly, the pandemic hangover that seems to be motivating mass-market shoppers now first appeared much earlier in the luxury market. High-end houses, cars, boats and other pricey goods have long shown remarkable pandemic-fuelled strength.

In the luxury automobile sector, for example, executives have tied record sales directly to the psychology of the pandemic.

“Many people witnessed people in their communities dying from COVID, and it made them think life can be short and you’d better live now rather than postpone until a later date,” Rolls-Royce CEO Torsten Muller-Otvos said in January when announcing that 2021 sales were the highest in the company’s 117-year history. “It is very much due to COVID that the entire luxury business is booming worldwide.”

While there is a yawning chasm between a US$50 sweater from the Gap and a US$500,000 Rolls-Royce, the mindset of consumers – rich and not-so-rich – coming out of the pandemic is very similar.

Mr. Ceci agrees that the current retail phenomenon is rooted in our very nature – humans are social animals. “Human engagement matters,” he said. “We want to connect.”

The modern twist on Aristotle’s observation is that we will go into debt to do it. And that opens up a whole new can of economic worms.