Just one hour before the winter sales officially begin in the main distribution chains, pessimism is once again the main protagonist of this traditional “consumer fair”. Almost everything looks bad. Fewer job contracts planned for these next two months than in other years, a convulsive economic situation, less consumer appetite in citizens and a country that lives with resignation the second wave of infections by the coronavirus between the perimeter confinement, the reductions in capacity in shops, when not early or permanent closing.
Something more or less similar was experienced a month and a half ago, with ‘Black Friday’ and ‘Cyber Monday’, at the end of November, but the final result seems that it has not been as negative as the omens. With the first data published by the Bank of Spain, the outstanding balance of consumer loans increased by 8,235 million euros in November, 4.5% more than the data of the previous month, to stand at 192,737 million.
‘Black Friday’ is the kick-off of three months of uninterrupted cult of consumerism. It is celebrated twenty-four hours after Thanksgiving Day (the fourth Thursday of the month of November to perpetuate the American tradition of not having fixed holidays except July 4) and owes its name to the fact that the income generated on that day is capable of to change the red numbers (losses) for black numbers (gains) in the accounting books of the businesses.
With the special circumstances that occurred on those dates, in full expansion of the first replica of the pandemic, the data have been above forecasts. Randstad, the world’s leading recruitment company, announced then that the ‘Black Friday’ campaign and its satellite days would generate around 27,430 contracts in Spain, 5.4% less than in the previous year, when 29,000 were reached. Two thirds of these were linked to the logistics and transport sector, and the rest, just over 10,200, to shops.
Household debt
In the end, the ‘Black Friday’ of 2020 has been very similar to two years before. In 2018, with Spain free of health uncertainties, a net 8,498 million euros were granted in November in consumer loans, raising the final debt of Spanish households for this concept to 189,949 million (+ 4.68%). In 2019, the data was the best in the last five years, with more than 10,800 million euros granted in financing, 5.8% more.
It cannot be forgotten that, according to the Bank of Spain, credit to families fell 0.7% in November, mainly due to the negative contribution of loans for house purchase. In that month, the total debt contracted by families in mortgage financing fell by 1.3% in the interannual rate, in line with what has been happening in the last year and a half. Quite the opposite that happened in financing to companies, which increased by 5.4%.
Consumer loans have been increasing exponentially over the last five years, to the point of deserving special vigilance by the Bank of Spain, as these are loans for an average amount of less than 10,000 euros, but whose concession and guarantee requirements are weaker than those of mortgage financing. Of course, they are the most profitable for banks in the current conditions of negative interest rates (7.84% on average in 20202, compared to 1.95% for the purchase of a home), but their delinquency rate is also much higher.
In 2019, the amount of new consumer loan operations amounted to 36,237 million euros, almost double that in 2015, when 19,747 million were recorded. Between January and October, the granting of this type of credit has been reduced by 27.16% due to the economic situation.
Sales fell 20% in the summer sales
The last reference on consumer behavior in sales in times of pandemic dates from last summer. In the first two weeks, sales were down 20% in relation to the same dates in 2019. The textile trade employer, Acotex, estimated the drop in sales of 1,500 million euros for the sector.
Adecco, another of the world’s largest temporary work companies, has planned a hiring 167,000 people for this winter season, which is a reduction of between 5% and 10% in relation to the previous year. Catalonia, with 30,000 new workers, and Madrid, with about 24,000, will be the most benefited from the labor point of view, together with Andalusia (19,500) and the Valencian Community 18,700).
The success or failure of the season will not depend on how much prices are reduced, but on how mobility and capacity restrictions evolve in the coming weeks in the different autonomous communities. And things, for now, do not invite optimism.
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