Is the Holiday Shopping Season Going to Be a Success? The Answer Is Murky.

Eager for bargains, American consumers filled their shopping carts last weekend with holiday gifts. But it isn’t yet clear if that means this will be a successful season for retailers.

Early readings of spending over the Thanksgiving weekend suggest that consumers spent more than they did last year — but that’s only because prices are higher. It might still be considered good news, if viewed against earlier expectations that rising prices, higher interest rates, the return of student loan payments and concern about the economy could have had people pull back on spending.

But the critical measure of the health of consumers will be if they keep spending this month, even when those extraordinary Black Friday discounts are gone. In recent months, companies have reported seeing consumers respond more to promotions, like the ones offered last weekend, and shying away from big purchases.

Although Black Friday gets a lot of attention, the holiday shopping season runs through December and for it to be a success for retailers, they’ll need people to pay higher prices for the rest of the year than they did in the days after Thanksgiving. If businesses have to keep deepening discounts just to get people in the door, that’s going to be a problem.

“That’s what will determine the winners and losers as we get through the rest of the holiday season,” Matthew Shay, CEO of the National Retail Federation, a trade group, said on a recent conference call. The NRF kept its forecast that holiday sales — from Nov. 1 to Dec. 31 — would grow 3% to 4% this year.

That forecast isn’t adjusted for inflation. Neither are the early readings of sales over the weekend. Mastercard, for example, said sales both in stores and online rose 2.5% on Nov. 24, from a year earlier. But with consumer goods — excluding food and fuel — rising at an annual rate of around 4%, that suggests that retailers aren’t necessarily moving more merchandise.

“We think sales were not strong; they were so-so, to the point of being mediocre,” said Craig Johnson, the founder of the retail consultancy Customer Growth Partners. His firm estimated that sales for the four-day period starting on Black Friday and ending on Cyber Monday was $94.2 billion, up about 2.5% from last year. Like Mastercard’s estimate, the retail consultancy forecast that — adjusted for inflation — sales slipped slightly, Johnson said.

Some large retailers seem to be prepared for the slowdown in demand. Companies such as Target and Macy’s have reported that they’ve cut inventory levels in recent quarters, and that may put them in a better position to profit even if demand is weaker, according to Edward Yruma, an analyst at the investment bank Piper Sandler.

If stores have too much inventory on hand, they may have to cut prices more than expected, which would erode their profits.

“Really for the first time in four quarters, we are seeing retailers get inventories better aligned with sales,” Yruma said. “That’s allowing them to have on-plan promotions.”

Retailers have been keeping a close eye on consumer behavior over the past year. The pandemic-era fiscal stimulus checks many used to shop in the past two years have now been spent. And while the rate at which prices are rising has eased significantly, the overall increase in prices is starting to weigh on customers. High interest rates and the restart of student loan payments are weighing on consumers, too.

After more than a year of touting a resilient consumer, many companies reported in the most recent quarter that customers seem to be pulling back.

Brian C. Cornell, CEO of Target, told analysts on a recent earnings call that the company was “navigating through a very challenging environment as consumers continue to rebalance their spending between goods and experiences and make tough choices in the face of persistent inflation.”

The most recent personal consumption expenditures inflation measure, released Thursday, confirmed consumer spending slowed in October. That comes as people are also looking to spend more on services like plane tickets instead of goods like video games.

And those consumers are showing signs of distress in other ways. Adobe, which tracks online spending over the Black Friday weekend, said purchases made with “buy now pay later” plans that let people buy on credit rose 42.5% from last year.

It’s true that the buy now pay later options are more readily available than in recent years, but the shift to credit also comes as retailers who offer other forms of credit are reporting higher delinquencies. That suggests consumers won’t be able to continue spending like they have been, said Kathryn Rooney Vera, chief market strategist at StoneX, a financial services company.

“It’s not sustainable,” she said. “It shows an unhealthy trend.”

This article originally appeared in The New York Times .