David Rosenberg

Watch for the Black Friday Hangover – David Rosenberg

The markets were positively giddy last week when reports came in about Black Friday shopping. Stores were seeing brisk sales and ecommerce saw a sizable jump in YoY sales. While it was good for a market rally, what does it spell for Q1 early next year. David Rosenberg says to watch out for the Black Friday hangover when the bills come due.

He writes in his latest investment note:

Credit card usage was quite rampant on Black Friday — it outstripped cash and debit-card payment by more than a two-to-one ratio. But when the bills come in early in the New Year, look for a bit of a consumer pullback — another risk to the Q1 outlook (especially if we wake up on December 17th and realize that Congress has recessed without extending last year’s tax goodies into 2012).

With economic crisis in each direction, complete political gridlock in Western countries and continued unrests in the Middle East it is not a stretch to see consumers pulling back in Q1 after the credit cards bills for Christmas start rolling in. This would represent a decent downside risk to GDP numbers in Q1 if retail traffic plummets as Rosenberg suspects.

Rosenberg continued his note:

Despite all the hoopla over Thanksgiving, total chain store sales only came in +3.2% YoY in November, which was light versus consensus expectations and far slower than the 5.5% pace of a year ago. Volumes may have been blown out, but the retailers cannibalized their margins with the widespread promotional activity. Not only that but one-third of the retail universe missed their sales targets last month. And guess what item was the hottest seller in the post-Thanksgiving sales rush? Try … hand guns: a record 32% YoY pace (to 129,166 — based on FBI background checks). All of a sudden, being a bank teller or gas station attendant just became a tad less safe.

Nothing like record gun sales to boost the holiday cheer.

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