We'll need to wait a week to see what the Black Friday sales pop really meant

11/29/2011 1:45 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Can you trust the headlines about Black Friday retail sales?

Yesterday, November 28, stocks soared in part at least, since I think news/rumors from Europe had something to do with the rally, on reports that retail sales on Black Friday, the official start of the holiday shopping season, climbed by 6.6% from the same day in 2010. (The day after Thanksgiving is called Black Friday since it’s the date on which many U.S. retailers move into the black for the year.)  Online sales climbed by 24.3% from 2010.

The figures have met with a lot of skepticism—which I find encouraging for stock prices. It means there are still a lot of investors out there who aren’t convinced that the U.S. economy isn’t going to lay an egg in the fourth quarter. If the data over the next couple of weeks converts some of them, their change of mind will push stocks higher through—perhaps as long as--the end of the year.

We’ll get our next read—and our next set of headlines on retail sales—next Monday when we get data on retail sales for the December 2,3,4 weekend. Analysts will study that data to see if the Black Friday weekend was so strong because it cannibalized sales from other weekends in the holiday shopping season.

A lot of the skepticism comes from the very obvious conflict between strong retail sales and a lousy economy. But recent data from the Federal Reserve makes it clear where the money for this round of consumer spending could be coming from.

In the third quarter consumers reversed some of their recent frugality and stopped saving quite so much, spent more of their incomes, and took on a little more debt.  Consumer debt, excluding mortgages and home equity lines, rose by 1.3% to $2.62 trillion in the quarter. (Including mortgage and home equity lines of credit, total consumer indebtedness fell by $60 billion in the period. All of that was a result of a $114 billion decline in mortgage balances as consumers continued to deleverage their houses.)

This isn’t a formula for a long-term increase in consumer spending—for that I think you need a bigger increase in consumer incomes than we’re seeing. But it could be enough to get the U.S. economy and stocks through the holiday shopping season.

 

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