2013-02-14
Since the last recession, we have been arguing that demand deferred by companies and consumers is demand that does not go away; it will resurface again. Such demand is suppressed but can only be denied for so long.
In New England last weekend, we had a huge snowstorm by historic measures. By Sunday, the woods around my home were filled with cross-country skiers. Typically, after a snowstorm a few skiers appear, but not the hundreds I saw on Sunday. The trails were mobbed because we had been experiencing a virtual snow drought. Suddenly, when all this snow fell, all that pent-up demand erupted and skiers hit the trails.
In the United States, consumers have been denying themselves big consumer purchases, such as cars and appliances. As consumers, when we see these items age, we want to buy new ones. But a catalyst is needed to get us buying again. The big snowstorm was the catalyst for the skiers. And a better stock market and jobs numbers have been the spark for consumers, who have once again begun buying cars and appliances.
The same theory applies for companies. During and after the last recession, companies decided it was prudent not to put money into “capital expenditures.” Sales of big ticket items, such as computers and computer networks, stalled. Companies may have put off these necessities for a time, but the need was still there and suppressed…until now.
That pent-up demand also needed a catalyst, which came in the way of more clarity on taxes from Washington policymakers and on news of improved exports and world trade.
And now we have begun to see companies spend on big-ticket items, such as trucks and software. Eventually this demand will lead to hiring. Once again, pent-up demand has been released, and we are seeing it in the numbers.
Until now, the business cycle had shown signs of acceleration, but the demand that was needed to really give it a jump-start remained bottled up, just like the skiers waiting to hit the trails. Now that this demand has been unleashed, stay tuned for some top-notch sales and global growth. And to the skiers out there, I would just say: Stay tuned.
No forecasts can be guaranteed.
The views expressed are those of James Swanson and are subject to change at any time. These views are for informational purposes only and should not be relied upon as a recommendation or solicitation or as investment advice from the Advisor.
24070.66
Of snowstorms and pent-up demand
Since the last recession, we have been arguing that demand deferred by companies and consumers is demand that does not go away; it will resurface again. Such demand is suppressed but can only be denied for so long.
In New England last weekend, we had a huge snowstorm by historic measures. By Sunday, the woods around my home were filled with cross-country skiers. Typically, after a snowstorm a few skiers appear, but not the hundreds I saw on Sunday. The trails were mobbed because we had been experiencing a virtual snow drought. Suddenly, when all this snow fell, all that pent-up demand erupted and skiers hit the trails.
In the United States, consumers have been denying themselves big consumer purchases, such as cars and appliances. As consumers, when we see these items age, we want to buy new ones. But a catalyst is needed to get us buying again. The big snowstorm was the catalyst for the skiers. And a better stock market and jobs numbers have been the spark for consumers, who have once again begun buying cars and appliances.
The same theory applies for companies. During and after the last recession, companies decided it was prudent not to put money into “capital expenditures.” Sales of big ticket items, such as computers and computer networks, stalled. Companies may have put off these necessities for a time, but the need was still there and suppressed…until now.
That pent-up demand also needed a catalyst, which came in the way of more clarity on taxes from Washington policymakers and on news of improved exports and world trade.
And now we have begun to see companies spend on big-ticket items, such as trucks and software. Eventually this demand will lead to hiring. Once again, pent-up demand has been released, and we are seeing it in the numbers.
Until now, the business cycle had shown signs of acceleration, but the demand that was needed to really give it a jump-start remained bottled up, just like the skiers waiting to hit the trails. Now that this demand has been unleashed, stay tuned for some top-notch sales and global growth. And to the skiers out there, I would just say: Stay tuned.
No forecasts can be guaranteed.
The views expressed are those of James Swanson and are subject to change at any time. These views are for informational purposes only and should not be relied upon as a recommendation or solicitation or as investment advice from the Advisor.
24070.66
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