“Economically speaking, this is not a bad time to consume less for a while”

Published on: 24 November 2022

The latest iPhone. A bigger flat screen, with an even clearer picture. ‘Ultra-fast fashion’ with 52 collections in a year, made to be worn for a short time. As a consumer, it can be hard to resist temptation sometimes. And eager buying is good for the economy. But we are also increasingly running into the limits of our consumerism. What are those limits? And what does all that consuming get us? In this series, we invite people from various backgrounds to discuss these issues from their specific point of view. Episode 1: the economic perspective - explained by Charles Kalshoven, macroeconomist at APG. 


“Discounts of up to 90%”, “Bizarre” discounts, “Exclusive one-day deals!”. If there is one day when consumer temptations lurk, it is Black Friday. Some chains even stretch the concept into “Black Weeks”. How big an effect does Black Friday actually have on our economy? And how important is Black Friday to Dutch retail?

Kalshoven: “The fourth quarter is an important quarter for retail, because of the Sinterklaas and Christmas period, among others. In the third quarter, consumption growth stagnated this year. Consumption of durable goods, such as furniture and cars, even slumped, but this was disguised by the fact that demand for services held up. Black Friday may give sales a push in the right direction. In that sense, from a retail perspective, the phenomenon is important. Moreover, the sales on Black Friday provide an indication of what the rest of the fourth quarter will look like.”

How big do you expect the Black Friday effect to be this year?  

“In October, consumer confidence reached a record low of -59 (see box). In November, it reached -57. But that is still well below the average of -9 over the past 20 years and lower than around the time of the euro crisis or the credit crunch in 2007/2008. While this figure is based on consumers’ own judgement and expectations - which do not always match what they do - based on this, I don’t expect exceptionally exuberant consumption on Black Friday 2022. On the other hand, retailers should not be too gloomy either, as on average the outlook for purchasing power is good. After all, the much-needed government compensation measures are coming: the energy cost allowance in November and December, the energy cap as of January 1, 2023 and the minimum wage increase of more than 10 per cent on the same date. Plus, average wage growth in the Netherlands next year should be able to outpace the declining inflation rate.”


How is the consumer confidence rate measured?

“Consumer Confidence provides information on consumers’ confidence and opinions regarding developments in the Dutch economy and in their own financial situation.

Consumers are asked about their opinions on their current financial situation in the past 12 months, their financial situation in the next 12 months, whether they consider it a favorable time for making large purchases, the economic situation in the past 12 months and economic situation in the next 12 months. From each question, the balance of positive and negative responses is taken as a percentage of total responses. Consumer confidence is the mathematical average of these five sub-questions.” (CBS website)

For example, a consumer confidence rating of -57 means that the percentage of consumers who are pessimistic exceeds the percentage of optimists by 57 percent.

So, for the retail sector, you expect a modest positive impact from Black Friday. Does the same apply to the economy in general?

“We currently have high inflation and in the current situation, we are more likely to bring it down if we moderate our consumption for a while now. Energy is scarce at the moment, but so are materials and manpower. If we reduce our consumption for a while, this will dampen demand for all three, so that their prices will also moderate. That would also allow scarce energy to be used where it is most needed - for example, for the furnace of a poor family in a poorly insulated house. So from a macroeconomic perspective, taking our foot off the accelerator is not a bad thing at all.”

So we should get rid of Black Friday?

“We live in a market economy, and that includes stores that cater to all sorts of things. In that sense, Black Friday is nothing new. However, temporary discount promotions can tempt consumers to buy things they don’t actually need. That not only affects consumers in their wallets, it also ultimately impacts the planet. Although that doesn’t always have to be negative impact. For example, I saw that an outdoor sports store is using Black Friday to offer free shoe maintenance and clothing repair on that day. An action like that can create new sales later and thus still contribute to negative ecological impact. But if, as a result, a customer buys one quality jacket for a period when he would normally wear out three jackets of lesser quality, on balance it is better for the planet. So, the question is always: which consumption do you replace with a new purchase? By the way, you cannot leave the sustainability of the economic system entirely to companies. For that, you also need a government that takes a guiding role.”

Consuming fewer products, purchasing more services: is this how we can serve the interests of economic growth in the Netherlands and a livable planet at the same time?

“In principle, yes, although this also depends on the types of services that would replace that product consumption, of course. After all, air travel is also a service, but one with a considerable ecological footprint. For such a transition, a guiding government is needed, which, through taxation, ensures that the least polluting goods and services become more attractive compared to the most polluting ones. And by taxing raw materials more and labor less. Creating more immaterial growth instead of material growth under these conditions is a form of 'decluttering’. It makes less use of resources and more use of brainpower and creativity. These do not reach their limits as quickly, unlike raw materials, which will run out at some point.”

Is that a realistic scenario?

“In the Netherlands, carbon emissions have decreased while the economy has grown. Even if you look at the research done by Andrew McAfee, who wrote the book More from Less about that, you can see that the American economy is becoming less and less resource-intensive. And that’s not because more and more manufacturing has moved to China. Economic growth there is increasingly in added value based on services. One example is brand value, which you create with marketing. So yes, it is definitely possible to achieve economic growth that leans more on services and less on physical products and at the same time reduce the negative ecological impact.”