First, before even starting, let me say that this article is not about politics. It is not about which politician is helping the economy or hurting the economy. Please, no political arguments on this site. There are other places on the Internet for that.
The world’s economy has been in the pits for a number of years now. Maybe it’s not as bad now as it was a few years ago, but in recent months it has certainly not been hot. But, even though the world’s economy has still been on the downside, perhaps we are starting to see improvements? The question is, though…. how will we know when things are back on track?
Really, the only way to know for sure that the economy is back is to wait and watch. Truth is, under normal circumstances, it will be 4 to 6 months after the economy has truly recovered before we will know that things are on the upswing again. Anybody who says that the economy is back (or not) is only speculating because we can’t know until we see the trend for an extended period of time.
In the USA, the employment rate has improved over the previous months. More people are working. Hopefully, more people will be feeling more confident, which will help the economy become even stronger over time. Confidence is a key indicator of where the economy will be headed in the short term.
I have a personal observation in this area, though, which has made me believe that things are moving in the right direction. I have an e-commerce site that sells gift products, and we deliver them all around the Philippines. You could really say that everything we sell is a luxury item because you can get by without sending gifts in hard times. So, when the world economy crashed in 2008, our sales fell quickly. In fact, we lost about 90% of our normal business at the time. It was quite devastating. Things have picked up over the years, but still nowhere near pre-recession days. However, this year for Valentine’s Day, our sales took a sharp climb! We were, in fact, back to more normal levels of business!
I don’t expect that everything will be back to normal now. That’s not going to happen overnight. It will take time to grow our way back to where things were pre-recession. However, I do hope that things will be showing movement in the right direction. And, I think things will move in that direction.
What do you think? Have we seen the worst yet when it comes to economic times? I now think that we have. I hope I’m right.
Good article Bob. It seems like people are starting to relax more with their spending. I notice a lot here in my area of the US. Although we have not seen the extremes that the rest of the country has had.
When you say luxury items, I guess their are many things that fall into that category for me. But I understand what you mean by that term. My wife has shown me a thing or two about living well within our means and it has paid off for us and I think that is what this recession has done for so many in the US as well. It really puts into perspective what is a necessity and what is not. People “need” food, shelter, clothing, and in the US a means of transportation. But it appears that even through the recession people still managed to spend on things that they didn’t necessarily need.
One example I can think of is the Iphone. You can get by with a prepaid phone but through marketing and product placement Apple created a “need” for it. And people came up with the money, but also phone companies made it easier to get this newer gadget. I tend to look at the whole picture though, so I think I do, and while getting this new phone for free a person still has to pay for phone service. Just a basic 2gb data plan and unlimited messaging with 450 minutes per month would cost $150 a month after taxes. At least that is the figure I found. And that was for one phone. So people will spend their money on something they want.
But I am sure from a retail perspective that you have, watching your sales fall is proof that a recession is in effect. I think people are letting loose a lot more, and are a little more cautious of what they buy but are still buying none the less.
Hi Darin – Thanks for stopping by! Nice to hear from you. You are so right that marketing makes “needs” of things that are not needs at all! Like an iPhone. If you can afford it, why not? But, a lot of people who have iPhones certainly can’t afford one. I know several people like that! 😉
Good article. However, the over all economy is not headed in the right direction. What we saw over the Holidays is just temporary. More and more people are losing their jobs and the other thing that is not mentioned in the media. When those that run out of their unemployment don’t bother looking for employment. So if the analyst’s look at that and see oh, unemployment is down. Not so I am affraid. Just sayin, you can’t believe everything you see in any media format. It is twisted to fit each side good or bad.
Hi Matthew – I am not basing anything I said on media reports. I am basing it on dollars coming into my business from the spending of real people. Valentines Day has been just like pre-recession days, in terms of sales. It’s a good thing. 😀
Somebody have said, I don’t remember who, that “Recessions are about the transfer of wealth from the timid to the bold”. The really sharp entrepreneurs make a lot of money in any economy. A smart thing to do is to diversify and have multiple income streams, just like you always advice, Bob. It guess it would have been hard to pay the rent and put food on the table if the online gift store where your only business.
I have several businesses in Sweden (manageable from anywhere in the world, i prefer Philippines…) and I think that we are not so affected by the recession as other countries (though a part of Europe and member of the European Union, we have our own currency and not Euro).
A smart idea for any businessman is not only to have multiple businesses but also have businesses in different countries in different parts of the world. Some economies are booming, despite the economy in the western world.
Hi Patrik – Nice to hear from you! You really have my ear when you mention multiple streams of income, it is a concept that I strongly believe in, and that I live my life by.
Another thing you mention that I strongly believe in is that recessions can be a great time establish a business. You can get things done cheaper in a recession, and if you can make it during a recession you will really thrive when the economy is on the upswing!
Thanks again for your comment, Patrik.