If it can happen there…
Credit tightening and the specter of inflation are having a negative impact on consumer spending in China. We have been talking about China’s inflation problems in our presentations and webinars. China correctly reigned in available credit in an attempt to purge inflation from the economy. It was necessary and it is the right move. The follow-on effect is a slowdown in consumer activity, particularly for more expensive durable goods. Expect a gradual slowing of consumer activity in China as we progress through 2012 and into 2013. The impact will become noticeable in 2013, which is wholly consistent with our global forecast for 2013 and 2014.
China is likely also providing a practical demonstration of what will happen here in the US in 2013 and 2014. Readers should plan now on how to combat a tighter lending market and a slower consumer market as they become manifest in 2013 or 2014. A suggestion: begin by determining which products are the most resistant to a slowdown in the economy and plan on raising prices on those items in 2012 and into early 2013. Then be prepared to roll back prices some in 2014 if price can be used as a consumer inducement.
We will have more inflation preparation ideas for you in the coming months.