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Black Friday

• Evan Davis | Stars and strife |
• 23 Nov 07, 04:47 PM

I've arrived in the US for a 10-day look at some of the economic jitters here. And guess what: I find I have arrived in New York on Black Friday.

That term is apt to mis-interpretation. Black Friday is not another bad hair day in Wall Street. It's the term used by American retailers to describe the day after the Thanksgiving Holiday, seen as the semi-official start of Christmas shopping season. (It isn't really the start, by the way: the decorations do go up earlier.)

The name Black Friday is reported to derive from the 1970s, and comes from either the bad traffic conditions prevalent, or from the fact that retailers expect this day to mark the season of the year, in which they expect to go into the black.

It is a bit of a tradition. To my amazement, the shops open at about 5am; some in fact are beginning to open on Thanksgiving itself. Queues build up round the block, the shops offer so-called "doorbuster" deals. It's all great fun.

Now, the shops will look busy today, and there is already a lot of hype around the great deals on offer. But the big question is whether this year's Black Friday will really be black for retailers. Can they possibly enjoy strong trading in the frazzled economic conditions of the time?

It's a question of importance to the whole world.

For years, we've grown dependant on American consumers as the world's spenders of last resort. They've kept Europe out of recession, allowed China to industrialise, and prevented global deflation.

But at the same time, they've not been looking after their own futures. The savings ratio in the US (the proportion of households' disposable income that is not consumed) has been in a long-term decline since the early 1980s. In the most recent data, it has dipped negative – yes negative. It means they are "running on empty" as they say. It can't go on.

This year surely has to be the one where the long-awaited turn occurs.

Why now? It's simple. For the past decade, Americans have seen their wealth increase without them having to save: first, their shares went up, and when they stopped rising in 2000, their houses went up.

That gave people a sense of wealth that appeared to justify saving less.

But with the housing market in serious decline, people will have to save if they want a pension. Not just sit and watch the pension materialise out of nowhere.

So the question for the shops over here, and for the world's manufacturers, is how big and how fast will the adjustment in US savings be? Here are three options.

• Will Americans just raise their savings to back inside positive territory for example? That would still be an adjustment for us all, because world spending growth has been boosted in the recent past by that small decline in US savings.

• Or will Americans slowly raise their savings back to a normal historical level – 5 to 10% of income, say? That would represent quite a big adjustment for the world economy. Remember the US is 25% of global spending, and US consumer spending is probably about 20% of the world's total demand. Saving 5% of that, is like a 1% reduction in global demand.

• But the third and least attractive option for the world is that Americans over-compensate. They might see their house price fall, and think "not only am I not getting richer anymore, I am actually getting poorer". In which case instead of simply reverting to normal and saving 5 to 10% of income, they might choose to make up for lost ground and save 10 to 15% instead, at least for a few years.

We won't know which of these three courses the economy will follow by the end of Black Friday, but this season's shopping might provide the first clues.

I'll hope to get some early comments on the retail scene on ³ÉÈË¿ìÊÖ TV news programmes early next week.

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