Will holiday shopping figures boost CD rates?
December 06, 2011
Interest rates on CDs have been falling for practically the entire year. But could the holiday season be the time they finally reverse course?
This possibility is not inspired by some Dickensian vision of bankers, filled with the holiday spirit, suddenly finding it in their hearts to offer customers higher CD rates. No, the possible link between the holiday season and rising CD rates is based in practical economics, but bank customers could find the result heart-warming all the same.
Signs of retail cheer
Shopping figures are the key link between CD rates and the holiday season. The sputtering economy has helped keep CD rates low this year, and until there are signs that economic growth is picking up, a variety of factors will likely continue to hold interest rates down.
That's where the holiday shopping season comes in. It's not simply that busy stores during the holiday season are enough to represent an economic revival--business is expected to pick up at that time of year. It's actually the degree of improvement that matters.
Because the holiday season traditionally represents such a big chunk of consumer activity, it can make or break a retailer's year. Think of it as kind of a final exam for retailers. It's not that the rest of the year doesn't matter--it's just that this period matters most.
Based on early data from the Black Friday long weekend--the four-day period beginning with Thanksgiving that kicks off the holiday shopping season--this final exam for retailers is off to an encouraging start. According to survey data from the National Retail Federation (NRF), the Black Friday weekend saw shoppers turn out in greater numbers and spend more per person than ever before.
The NRF estimates that 226 million people shopped at stores and online over the Black Friday weekend, up 6.6 percent from last year's 212 million shoppers. On average, those making purchases spent an estimated $398.62 while shopping, up 9.1 percent from last year's average of $365.34.
The bottom line is that the NRF estimates that total Black Friday weekend spending reached a record $52.4 billion, up an impressive 16.4 percent over last year. The question is, does this success reflect a true jump in total holiday spending plans for this year, or simply a frenetic first weekend of the shopping season, fueled by aggressive promotions? The answer will unfold over the weeks ahead.
Wait until after Christmas
If all continues to go well, bank customers might see CD rates start to perk up--but they may have wait until after Christmas to really benefit. After all, it may take the full season to prove that shopping really did experience a meaningful jump, and it could take even longer before cautious bankers reflect the improving economic trend in their CD rates.
Still, even without an immediate reward, any hope of higher interest rates should be welcomed by bank deposit customers. That hope might be enough to make CD buyers shy away from longer terms since better interest rates might be just around the corner.
