Thursday, October 13, 2011

Depression rises as recession looms

There has been little optimistic news over the last week, especially for those living in Europe. Greek debt, austerity efforts, protests over cuts and rising unemployment has dominated the headlines [BBC / FT].

On the face of things it is not immediately obvious that Britain is on the brink of a double-dip recession, as some media has been predicting. People are still dining in restaurants, pubs and bars are far from empty and supermarkets are just as packed with shoppers as ever before.

But there are some signs that people are being more careful with their money and that businesses are making greater efforts to draw in extra custom with special offers. Supermarket shelves are lined with 2 for 1 offers and other deals to persuade shoppers to part with their cash. But consumers are still being careful, looking for any way to save on their weekly shop.

The queues in the 99p and One Pound shops say it all. Even in relatively affluent areas such stores are often packed with shoppers looking for savings on everyday items. And in some cases the savings are significant. A simple light bulb may cost as much as £2.50 in any one of Britain's leading supermarkets and yet may be purchased for less than half in discount stores that are taking advantage of people's thriftiness. Breakfast cereals are also significantly cheaper in such stores, though there is obviously less choice.

Consumers are also taking advantage of special offers, free gifts and reduced items. Supermarkets, in particular, often mark down perishable items as they reach their sell-by date. Such reductions can offer rich pickings for the savvy shopper especially if there is a 2 for 1 offer already attached to the items concerned. In a local Waitrose supermarket shoppers eagerly take advantage of price reductions. A £4 pizza already with an offer of a 'buy two and get £2 off' might be priced down to as little as £1.49 each. Due to the checkout system, any customer purchasing two such items will walk away with them for only ninety eight pence.

Those who have plenty of freezer space can take massive advantage of such deals. Customers can often be seen grabbing several pints of milk reduced to as little as nineteen pence which will be thrown into cold storage along with their reduced pizzas and other marked down items.

Fish, meat and vegetables are also reduced significantly on their use-by dates, and such purchases can save shoppers many pounds in their weekly spend. Of course it does require some effort on the part of consumer to hunt out such bargains. Those lucky enough to be in full time employment may be less lucky to grab such deals, both through being too tired to shop after a day at the office or be too late home to take advantage of the offers since most reductions will have disappeared from the shelves by 7pm.

But even for the workers there are some deals out there which can break up the monotony and save a few pennies. Some newly opened businesses may often offer free deals or specials. One such example is the recently opened Vertigo Lounge, a trendy bar come coffee shop on the outskirts of London. To entice customers in, such that they might return, they have a promotion of offering a free coffee to anyone visiting on Wednesdays between 10 am and midday. It was clear from the number of people in the establishment yesterday that many were taking advantage of the free offer. These customers may have also grabbed their free box of cereal by way of a promotion from Kellogg's. The company had posted a bag through resident's post box asking them to leave the bag outside by 9 am the following morning if they wanted a free box of All-bran Golden Crunch, a crunchy wheat bran and mixed cereal pieces with a caramel flavour.

It seems that while there may not be such a thing as a free lunch, there is sometimes the chance of a free breakfast and a cup of coffee!

But a free box of cereal and a cappuccino is not going to sustain the struggling consumer for very long. With rising unemployment, concerns over government debt, the European debt crisis and even concerns that Asia may also be seeing the effects of a deepening recession in the west, the future is far from rosy. Even China's relatively strong economy may be severely dented by the growing economic crisis [CNN / Reuters / BBC / FT].  

In the US there has been a wave of protests under the banner of Occupy Wall Street in recent days [Herald Mail / WSJ / Time]. In Britain protests over cuts to NHS budgets were seen at the weekend in London [BBC]. And across the continent there are raised voices with Greece seeing riots and widespread industrial action [WSJ].

There is no apparent end in sight to the economic gloom predicted, and no-one, least of all the politicians. seem to have a clear solution.

The US, Europe, Britain and many other countries face a long and bumpy ride. For the citizens of these countries, whether they be consumers, tax payers, job seekers or students, the future looks extremely depressing and bleak.

Of course there are some that believe the constant talking down of the economy is not helping matters. In his 1933 presidential address Franklin D Roosevelt declared, "The only thing we have to fear is fear itself..." and went on to say that, "Nameless, unreasoning, unjustified terror which paralyses needed effort to convert retreat into advance."

Bank of England governor Sir Mervyn King's declaration that the financial crisis is worse than the Great Depression is hardly a confidence booster. The Daily Express is at least one paper which, although conceding the European economy is in a "sticky patch", suggests that preaching words of doom and gloom is not helping. Sir Mervyn "appears not so much to be talking us into recession as bawling it through a megaphone," the paper declares. And while there are indeed very serious issues, such as high unemployment and rising debts to be tackled, the Express calls for a more positive outlook. "What we need in the current crisis is a governor of the Bank of England who can build confidence in the markets," the paper says.

Such an approach is sensible, but solutions to the economic problems are also needed. An over stretched global economy, and the farming out of jobs to cheap foreign factories has reduced the western manufacturing base considerably over the fast few decades. The Made in Britain, Made in the USA and other such tags have been replaced by China, Bangladesh, India, Taiwan and Thailand.

While cheaper, and some might argue inferior, products flood the market it comes at a price. Closed factories and a reduced jobs market in the west. Politicians in the west will have a difficult time attempting to balance accusations by Asian countries, particularly China, of protectionism as it tries to re-establish its domestic manufacturing and industrial base. But such a policy is needed if the western economies are to survive. Simply put, without a solid industrial base there are no jobs, and it will not matter how cheap foreign manufactured products are if the vast majority of people are unemployed.

There are tough times ahead, but tough decisions too.

tvnewswatch, London, UK

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