By Keshav Mody

Edited by Subha Sivakumar

In the post-Thanksgiving haze, as the aroma of leftover turkey lingers, a different kind of frenzy takes hold across the United States. Black Friday, the day after Thanksgiving, is a cultural phenomenon deeply ingrained in the American psyche. While it may conjure images of bustling malls and early-morning crowds, the roots of Black Friday trace back to the 1960s, when it was coined to describe the chaotic day where retailers would officially move “into the black” or turn a profit for the year. 

In data presented by CNBC, Black Friday 2023 shattered records for the second consecutive year. A colossal $9.8 billion were spent, marking a substantial 7.5% increase from the previous year which concluded with $9.2 billion. This robust growth showcases the enduring appeal of Black Friday, turning it into a major economic event that significantly contributes to the overall retail landscape. For a deeper dive into these statistics, look to Deloitte’s 2023 holiday survey. “Participation levels have been inching up since record lows in 2021; this year, 95% of consumers say they plan to purchase during the holiday season.” Deloitte. Rebounding from 88% in 2021. Furthermore, consumers expect to spend around $1,600 which is a huge improvement from pandemic levels of $1,455. 

As retailers eagerly unveil their most enticing promotions, the level of consumer engagement on Black Friday offers valuable insights into consumer sentiment and spending patterns, revealing Black Friday as a powerful gauge of the nation’s economic health. Especially recently, as the lingering effects of the pandemic gradually subside, Black Friday emerges as a reliable barometer of consumer confidence.

Consumer confidence, often measured by indices such as the Conference Board Consumer Confidence Index, experiences a rise during Black Friday, reflecting the public’s willingness to engage in robust spending. Nikki Baird writes in her Forbes article, “The Present Situation index inched up, but the Expectations Index, which looks at the short term future, went up by a lot – from 72.7 in October to 77.8.” These positive expectations highlight Black Friday’s role not only as a retail bonanza but as an economic indicator echoing the broader standing of the nation.

The willingness of individuals to partake in significant spending during this period indicates a restoration of economic faith and optimism. Per National Retail Federation CEO and President, Matthew Shay, “The five-day period between Thanksgiving and Cyber Monday represents some of the busiest shopping days of the year and reflects the continued resilience of consumers and strength of the economy.” Monitoring Black Friday spending patterns provides valuable insights into the broader correlation between consumer confidence and economic health. As consumers exhibit a willingness to engage in robust spending, it signals not only a rebound from the challenges posed by the pandemic but also an indicator of increased trust in future economic prospects. 

The correlation between purchasing power and Black Friday spending is evident in the statistics. In fact, Black Friday sales often witness a surge in high-value transactions, indicating that consumers are not only willing to spend but are capable of making significant investments. According to PR Newswire, “Consumers plan to spend an average of $567during the Black Friday-Cyber Monday (BFCM) shopping events (Thursday, Nov. 23 – Monday, Nov. 27), up 13% from last year”. This insight into purchasing power is paramount for businesses, offering a real-time assessment of the economic strength of households.

Additionally, the influence of Black Friday on stock market performance is a dynamic relationship that reflects the broader economic sentiment. Successful Black Friday sales often translate into increased stock values for retail companies and can have a cascading effect on the overall market. An example of this is detailed by Investors Business Daily, “SHOP stock rose 4.9% to 73.79 on the stock market today. The company said merchants using its platform saw a record $4.1 billion in Black Friday sales. Sales through Shopify jumped 22% compared to the same day last year.” The connection between Black Friday and stock market performance is not limited to retail. Sectors such as technology and logistics, which experience increased demand during the holiday season, also witness positive market movements. The ripple effect from Black Friday spending extends beyond individual stocks, even to retail sector exchange traded funds , shaping the market’s trajectory in the weeks leading up to the year-end.

Certain brands and industries are more affected by Black Friday than others. Electronics, apparel and tech gadgets often dominate Black Friday sales, impacting the stock performance of companies within these sectors. For instance, companies like Apple and Amazon typically experience a surge in stock values during the holiday season, reflecting the increased demand for their products. The hospitality and travel sectors, on the other hand, may see a dip in stock values during Black Friday as consumer focus shifts towards retail spending. Knowing these sector-specific dynamics is crucial for investors looking to navigate the complexities of post-Thanksgiving market movements.

While Black Friday has traditionally been associated with in-store shopping, Cyber Monday emerged as its digital counterpart, capitalizing on the momentum generated by the weekend’s brick-and-mortar shopping frenzy.  The term was coined in 2005 by the NRF to describe the surge in online sales that occurred on the Monday following Thanksgiving. According to Axios, Cyber Monday sales reached a staggering $12.4 billion this year, up 9.6% from previous years. This surge in online spending underscores the ever growing significance of e-commerce during the holiday shopping season.

The evolving landscape of consumer preferences is altering the dynamics of Black Friday and Cyber Monday. As technology continues to integrate into daily life, consumers are increasingly drawn to the convenience and accessibility of online shopping. The COVID-19 pandemic further accelerated this shift, with lockdowns and social distancing measures prompting a surge in e-commerce activity. This trend reflects a broader transformation in the retail landscape, with e-commerce now playing a pivotal role in shaping the post-Thanksgiving shopping experience.  

The patterns observed during this shopping extravaganza also provide useful clues for forecasting economic trends. The strength of Black Friday as a dataset lies in its immediacy—the real-time nature of the data allows for agile adjustments to economic forecasts. The aforementioned NRF’s Black Friday and Cyber Monday analysis, for instance, serves as a reliable resource for predicting consumer behavior and shaping economic projections. 

 In summary, Black Friday stands not only as a commercial spectacle but as a pivotal economic barometer, offering insights into consumer behavior, purchasing power and the overall health of the nation’s economy. With its historical context, continuous growth and influence on various economic metrics, Black Friday provides economists, policymakers and businesses with a real-time snapshot of the nation’s economic stance. As consumer spending patterns evolve and e-commerce gains prominence, Black Friday’s enduring significance guarantees its place at the forefront of economic analysis, guiding strategic decisions in an ever-changing economic landscape.