Norwegian shoppers literally roared their way into the annual Christmas shopping season (julehandel) at “Black Friday” sales heading into the weekend, just as more reports emerged of high household debt levels. That’s not a good combination, economists warned, but sales were expected to climb once again.
Noisy crowds gathered around the entrances of several shopping centers in Norway in the early morning hours on Friday, waiting for them to open. Retailers rely on strong Christmas sales, and their national trade association Virke predicted they’ll rise another 4 percent this year. Norwegians are expected to spend a dizzying NOK 58 billion in December, according to a prognosis released by Virke earlier this month.
It all boils down to Norwegians spending an average of NOK 11,000 each (USD 1,300) in shops and restaurants during the holiday season, with 42 percent of that going towards food and drink and the rest on holiday items and presents.
Adjusted for inflation, though, the increase is relatively small. “Sales volume won’t increase, since we’re getting less for our money this year,” Bror William Stende of Virke told news bureau NTB. Another survey released this month showed that four out of 10 Norwegians questioned said they would actually like to drop Christmas gift exchanges entirely, but feel bound by tradition. It’s hard to resist both commercial pressure and a cultural heritage of gift-giving. Norwegians are thus expected to spend an average of NOK 6,460 each on decorations, clothing and gifts.
At the same time, more Norwegians are having more trouble paying their bills. Around 7 percent of Norwegian households are now struggling to make ends meet, according to a report released this week from the consumer research institute SIFO. That’s up from 5.3 percent in 2011, and twice the level in 2006.
“The numbers aren’t the highest we’ve ever had, but the trend is rising,” researcher Christian Poppe told NTB. “What’s alarming is that Norwegian households have never been so at risk as they are now.” That’s because of higher unemployment, the downturn in Norway’s most important industry (oil), higher debt levels and the prospect of higher interest rates.
Not everyone faced with job losses has managed to reduce consumption accordingly. Record high real estate prices have also led to rising household debt, which overall has been rising faster than income levels. Finance Minister Siv Jensen claims she’s watching the situation closely, and evaluating various measures to try to bring debt levels down.
Feeling wealthier than they are
Another problem is how Norway’s ever-rising real estate prices are making many Norwegians feel wealthier than they really are. When the market value of their own homes suddenly shoots up, the equity that yields on paper can boost consumer confidence and prompt people to borrow against it to fund everything from home improvements to expensive holidays and new cars. Debt levels thus rise even higher.
Newspaper Dagsavisen editorialized this week that Jensen must introduce measures that would make real estate speculation less attractive. It favours proposals put forth by the Socialist Left party (SV) that include higher taxes on second homes bought for investment purposes, introduction of a national real estate tax and reductions in the amount of mortgage debt that can be written off income taxes.
Meanwhile, shopping centers all over the country were competing to attract customers through the “Black Friday” sales, and advertising allegedly huge discounts on many items. Aftenposten reported that many of the items on sale are likely to be offered at the same lower prices in December.