Recession Watch!

Canny pricing in a slowdown

There is a super feature on pricing strategies from Adam Jones’s management blog on the Financial Times web site - available here

Canny businesses are willing and able to adjust their pricing strategies to suit ever changing business consumers. The key seems to be in having good market intelligence about which consumers have a demand that is sensitive to price and those who spending on goods and services is affected more by changes in real take-home income. Deep discounting is often observed in an economic slowdown or outright recession as businesses look to shift unsold stock, maintain sales volumes and generate extra cash to tide them through the tough times. But as the FT blog points out, offering discounts to consumers can risk unleashing an unwelcome price war (which damages profit margins) and overly-aggressive discounting can ultimately damage the brand.

There is a bit more on pricing do’s and don’ts in a recession here

NICE decade is over

Mervyn King declared that the NICE decade was formally over in his Inflation Report published today – NICE stood for non-inflationary continuous expansion (a good term to use in the exam) – but the combination of sharply rising food, energy and fuel prices is driving inflation higher whilst contributing to a fall in real incomes and a wider economic slowdown.

Setting rates is no longer kids stuff

According to Roger Bootle writing in today’s Telegraph. The MPC does face an acute dilemma with evidence of surging cost push inflation and the real possibility (probability?) that CPI inflation will overshoot the 3% ceiling at some point in 2008. But Bootle argues that if the MPC is too cautious over interest rates, fearing a return to a wage-price spiral, then we might well suffer the slump in real output and jobs that characterised attempts to put the lid on rampant inflation in the 1970s and late 1980s.

A cluster of profit warnings

Rarely a day goes by without one or more household names in the world of business, finance and commerce releasing a profit warning to the city. Listed companies are required to do so - releasing information that might materially affect the market value of their business - but the rash of profit warnings from different sectors of the economy is a reflection of the demand and cost pressures facing private sector companies. The squeeze is on and it will be interesting to see how corporate Britain reacts and responds to these challenging times.

Parcel problems ruffle Rentokil

Starbucks reports falling profits

Bovis sets out new profits warning

Downturn sparks Electrolux loss

Revision: Recessions

“What’s the difference between a recession and a depression? A recession is when your neighbour loses their job; a depression is when you lose yours.”

Interest rates, exchange rates and annual holidays

As expected, the Monetary Policy Committee of the Bank of England has cut the base rate by 0.25% today.

Policy conflict for the UK economy?

The IMF is forecasting a slowdown in global growth to 3.7% in 2008 and 2009. This is in contrast to recent growth rates of over 5%.

Economic Resilience?

Gordon Brown and his Chancellor, Alistair Darling, have been keen to stress that the economy is ready to weather any storm that hits it. Although the economy remains standing, despite recent turbulence in the financial markets, it does seem like tempting fate to claim that the economy is so resilient, and capable of withstanding any disturbances that might come along. So what supports their statements, and what are the risks to the economy? This post looks at a few of the problems on the horizon.

US Recession Watch: Hold onto your Hats!

The latest Standard & Poor’s/Case-Schiller house price index shows the biggest year-on-year decline in real estate prices for 21 years. Hold onto your hats - US Treasury Secretary Henry Paulson has come out with some very bearish statements on where the US housing market will head before the worst is over. 

Getting real…?

Despite continuing problems in the financial sector, UK consumers are defying the odds and doing what they know best - shopping.