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Thursday 4 December 2008

Good news for the prudent: we’re heading for recession

Richard Northedge says those who did not overspend during the boom years will soon be able to buy whatever they want at bargain prices, perhaps even with borrowed money

Commerce has become so reliant on consumers spending every penny they have, and quite a lot of pennies they haven’t, that it is not ready for a reduction in demand. Even if companies share their customers’ gloom, they dare not admit it. Factories are loth to shut production lines, shops cannot readily reduce selling space, rents are fixed. Business models require volume and if customers are reluctant to buy, the response is promotions and price cuts to stimulate purchasing and shift stock — even at the expense of profit margins.

And that means bargains for those brave enough to buck the trend and keep buying. Even the supermarkets are cutting food prices to win custom, but the biggest savings are going to be on the biggest-ticket items. If you thought kitchen manufacturers ran permanent special offers, wait for the discounts they will give in desperate attempts to attract trade. Watch how furniture com-panies take an axe to their prices in the same vain hope. Holiday companies will slash package deals. The price of cars — especially large, gas-guzzling ones — will tumble as they stand unwanted on forecourts.

The middle classes may not like haggling but the price of everything is becoming negotiable now. Suppliers have misjudged the market but the minority of people still prepared to purchase — indeed, those now able to acquire the big-ticket items they deferred buying during the boom — have the power. What better time to call in the decorators or have the house rewired?

And recession will mean bargains on small-ticket items too. If people are not writing large cheques because they can’t get the credit, they are also cutting back on smaller luxuries because their income is being spent on necessities. Hence hotels and restaurants come up with special offers. Even theatres sell empty seats cheaply.

More articles from: Richard Northedge | this section

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