Will Inflation Cancel Black Friday Sales this Year?

Hunter Cabot

Elevated Prices on Popular Gift Items Expected

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How Will Inflation Affect Black Friday Sales?photo by Freepik

Covid-19 has taken many things from us, and we're still feeling the blow. Even now, as we look ahead to the holiday season coming up in a few short months, there is reason to believe that Santa might have a hard time ticking off everything on his list, due to global repercussions from the pandemic.

Below is a look into the reasons why, and a list of items that are expected to still be in short supply this Christmas. Retailers will likely have to pay more for their inventory, making them unable to offer the usual Black Friday bargains. You may get a better deal on some of your wish-list items if you wait until 2022.

Inflation

Although the Labor Department released an encouraging report on Tuesday, showing the consumer price index increased at the slowest pace in six months during August, inflation is still very high - a 4% increase in the core CPI over the last twelve months. The CPI (consumer price index) is a tool used by economists to measure inflation through product cost.

The core CPI doesn't include food or energy inflation. Notably, food cost as a whole is up 3.7% from last year, with meat and fish alone rising 8%. Energy cost is up 25%.

Inflation is the natural outcome of the past eighteen months, and the rise was not unexpected by economists.

The combination of: 1) a huge slowdown in manufacturing during 2020, 2) a bottleneck in shipping as major ports closed during the worst of the pandemic, and 3) extra money in the pockets of consumers, have all affected supply and demand.

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The rise in CPI over 12 monthsBureau of Labor Statistics

Both low supply and high demand are what's driving the CPI up.

Supply Chain Slowdown

The supply chain is still suffering. Many industries had to lay off workers in 2020, and are now having a hard time getting them back. To entice staff, many companies are having to raise salaries. The cost is always passed on to the consumer.

Industries like transportation remain understaffed, and gasoline prices have risen - these also contribute to people paying more for goods.

Some items are made overseas in countries like Asia or India, which are still in the throes of a raging pandemic. Until the global health of people overall improves, we may continue to see shortages in textiles, electronics and furniture.

Even American-made goods may rely on components (like lumber) that are sourced from overseas.

Demand is Up

Certain things, like electronics, were so in demand globally when we were in quarantine, that the industry has still not recovered.

Everyone was home more in 2020, and a lot of households needed new computers to work from home, new phones to stay in touch, new electronic devices for learning and entertainment.

The factories making microchips, a component already in high demand before the pandemic, have now become hopelessly backlogged, especially after the 2020 shutdowns.

Last year's shutdowns caused the biggest manufacturing slowdown ever in the history of the industry. Experts think the microchip/semiconductor shortage will continue for at least another year.

The demand for furniture is up for both offices and homes, as people return to the office, and move into homes they may have purchased during the recent housing boom.

2020 was a record breaking year for the housing market, with a total of 5.6 million homes purchased during the calendar year.

The demand for clothes is up, as people are forced to get out of those comfy sweats and slippers and get back to work. The cost of clothing in general has risen 4.2% from last year, with an emphasis on work/office attire. The price of men's suits, for example, has risen 8% in the last month.

Some industries are expected to recover more quickly than others, but it's a safe bet that the following goods will cost considerably more for retailers this holiday season, which means they will cost more for shoppers.

Don't Expect Huge Holiday Deals On These Items

  • Televisions
  • Stereo equipment
  • Video equipment
  • Computers, Printers
  • Smart Phones
  • Major appliances (laundry, refrigerators)
  • Furniture
  • New cars

The above items are directly affected by the semiconductor and lumber shortages. Also expected to cost more this holiday season, due to overseas manufacturing and transportation bottlenecks, are:

  • Jewelry and watches
  • Sporting goods

If one of these items is on your must-have list, do your homework - check prices now.

Don't be fooled. Watch for retailers to jack up prices in late October or early November, so they can offer a "Black Friday Sale Price" that will appear to be a real bargain.

Even though a lot of Americans still have extra money in their pockets, it may be smarter to wait until 2022 to purchase some of those big ticket items.

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