Black Friday sales surge reveals consumer spending power despite rate fears
There is also now realisation in most business sectors that the nation’s inflation pressures are almost solely caused by government policies.
We may look back on the non clothing retailing developments in the final week of the so-called Black Friday month as ranking with the importance of the Reserve Bank’s interest rate decision.
The first three weeks of the Black Friday month had shown strong trading driven by spending from people whom retailers knew had a comfortable finance situation.
In the final week, in the traditional way, retailers cut prices further and expected a further rise in sales. But that rise came in volumes that stunned successful retailers.
People on lower incomes open their purses, wallets and credit cards to take advantage of those additional discounts.
In the clothing area, while the basic trends follow the overall market, trading is much tougher because clothing is not a big priority for large areas of the community. In many cases consumers already have too much clothing and young consumers take great pride in the bargains they get from op-shops.
They spend their money on technology devices instead.
As a result of the trading surge, non clothing retailers now believe there is spending power in the community which they can tap via discounts.
If that pattern is duplicated in the December Christmas /Boxing Day period – and retailers are very optimistic – then the availability of that spending pool will be entrenched.
The change goes further.
Those retailers that participated in the better sales environment are now looking at capital expenditures in a way that has been absent for many years and is being fanned by the big banks who are discovering that their home lending has become a commodity.
They are looking to maintain profits via business lending.
In this week’s announcement, the Reserve Bank picked up on the higher business investment trend which clearly covers non-retail areas.
I should add that not all non-clothing retailers have experienced a strong Black Friday month.
In particular, smaller High Street retailers usually don’t have the marketing and product variety crunch to take advantage of major consumer swings.
And those larger non clothing retailers that missed out usually have bad management.
In both the retail and retail supply areas, there has been a substantial fall in the market share held by smaller enterprises. This may have happened anyway but was accelerated by the Australian Tax Office (ATO) being brutal in closing family businesses that could not pay alleged tax debts.
In the process the ATO has substantially reduced competition and improved the environment for larger enterprises to maintain margins.
As we head into 2026 a wide range of businesses are experiencing higher costs most of which are government induced including government encouragement of wage rises and the high power prices partly caused by high cost renewables.
Where possible, retailers and their suppliers will look to lift prices particularly when they are selling to customers who are comfortable with their finances.
But what the final quarter of 2025 has shown is that consumers, including many lower income consumers, are very sensitive to the price of goods.
That means the first retail target must be lowering costs led by labour costs.
In addition, much of the capital investment is directed at lowering costs.
The ability of the government to force larger enterprises to involve unions in some forms of capital expenditure led by artificial intelligence should alert retailers to speed up labour saving.
And so around the retail sector and in many other areas of the economy we will see labour trimming. Staff reductions will be concentrated on people who are not performing as well as their peers. And for those who are lucky enough to be hired they will be watched intensely because nobody can afford to be stuck with a new employee who is a lemon especially as many employers are in the process of ”de-lemonising” their labour force.
In that context, not surprisingly, advertising for labour is declining.
The ANZ-Indeed job advertisements fell 0.8 per cent in November – the fifth consecutive monthly decline – to be 6.3 per cent lower than a year ago, which means there is a risk of higher unemployment in the coming months.
Significantly, the job ads fell across most states and territories in November, with the largest decline in Victoria. But over the past year, the fall in job ads has been concentrated in Queensland Victoria, and to a lesser extent NSW. Western Australia continues to outperform national trends.
Successful retailers believe a small increase in interest rates will not impact the spending trends that they see.
Confirming this, bankers tell me that a surprisingly high proportion of their mortgage borrowers did not lower their repayment rate when interest rates fell so they have been reducing debt at a faster rate than necessary which provides a buffer.
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Behind the Reserve Bank’s inflation/interest rate saga is a fundamental change in the retail sector.