Discretionary demand picking up

Is the relative slowdown in business activity, prevalent since some months before the election, over? There is anecdotal evidence that domestic economic activity is picking up again. The reference here is not to normal consumption – the spend on food, clothing and footwear and basic household necessities. That spend is more or less fixed and not subject to variation in moods and spirits.

The way forward in competitive terms is to recognise that success does not come cheaply

The reference is to discretionary spending, outlays on relatively expensive items that do not reflect basic need and can be postponed to better days. Such consumption had tailed off in the final quarter of 2012 and the first three months of 2013.

The reason was not so much economic as political. The Government was nearing the end of its normal life. With an election in the offing, there is always some slowdown in discretionary spending, the reason being uncertainty about the outcome.

This time round the uncertainty was bigger than usual. Independently of the imminent election, the political situation was as uncertain as could be. Dissidence within the Government’s ranks could not be higher. The Prime Minister used to say it was business as usual. Every Tom and his little niece knew that it was not so.

There was an effort to make it as if business was going on as usual. But it was not. The government was taking decisions to please individuals, but issues of a macroeconomic nature, for instance, were left by the wayside. Despite its minister’s best efforts, for instance, Mepa was turning into more of an inert monster than ever before. Lack of decision-taking by it and by other public sector institutions discouraged entrepreneurial spirits and cascaded into loss of confidence at every spending layer.

This was felt acutely enough at the time. Talking to leading members in the retail trade a common theme wound through their comments – “if things remain like this we might as well close shop”, they used to grumble.

At the time the Government side often held this was mere conjecture or, worse, an invidious attempt to dampen confidence. That it was nothing of the sort has been confirmed issued by the party now in opposition regarding the reasons why it lost the election so badly.

The reasons are not spelled out clearly and honestly enough. It was left to the Opposition leader to say on Sunday that the loss was real and that the 36,000 majority for Labour could not all have been wrong.

In economic terms the situation got worse in the first quarter of the year. By then it had become clear that the government was forced to fall on its sword. The end was near. But what would come in its stead? That is the key question that pervades every election.

With the thawing of the political winter and the sprouting of early spring it became clear enough that the new Government, whatever mistakes it might make, would be a stable one. Its parliamentary majority ensured that. Little by little uncertainty began to wind down.

It is that winding down process that is now providing evidence that there is some recovery in discretionary demand. Speaking to leading retailers in the furniture and household industry, for instance, confirms that enquires are being firmed into concrete orders. That is at the top end of the market. At that end too interest is being shown in property waiting for buyers, like the fields wait for rain in early autumn.

That is not to say that there is a demand boom building up. It is to say, though, that the darkness is being pierced by early light. What are businesspeople to do in the circumstances? So far they have been waiting patiently for the waters to settle, hoping that their bankers would keep faith in them despite their slow moving accounts.

The astute among them also took the opportunity to examine critically their way of doing things, the lines of goods they were offering, the efficacy of their customer care.

They should be doing more of that at this early stage of the recovery. The reality is that even if discretionary demand were to pick up significantly, competition is so fierce that some outlets will not feel invigorated enough by the fresh breeze. Competition is a reality. It demands attention. Those who do not give an adequate response will fall by the wayside.

The way forward, then, is not simply a recovery in discretionary demand. That should strengthen as the Government gets into its stride and fresh initiatives begin to nudge the weaker sectors of the economy to pick up speed along with the stronger ones. The way forward in competitive terms is to recognise that success does not come cheaply.

Increasingly buyers seek value for money. They will shop where they truly find it after strong, discriminating assessments. Even giving value for money is not enough. It has to be better value than that offered by the closest keen competitor.

Such are the lessons to be learned and acted upon during lulls in discretionary demand.