Recent industry research shows the following characteristics of the current economic situation:
- Decreased Purchasing Power: The willingness to buy non-essential items is declining. Luxury goods, not being daily necessities, are losing their appeal.
- Changes in Disposable Income: The proportion of disposable income spent on necessities is increasing. Consequently, the demand for affordable essentials is rising, leading to supply shortages and price increases. This is also known as the Giffen goods effect, where the demand for a good increases despite a price rise, contrary to normal expectations.
Therefore, we observe that some basic consumer goods like instant noodles, soda, and utilities are experiencing price hikes. For instance, instant noodles have increased from 4 to 5 yuan, and soda from 3 to 3.5 yuan. At the same time, the prices of luxury items such as branded cars, designer clothing, bags, and high-end custom goods have significantly dropped, with some models even being heavily discounted.
Although a 25% price increase for instant noodles from 4 to 5 yuan seems substantial, it is relatively insignificant for the average consumer. This is why, as investors and entrepreneurs, we should focus on industries that can achieve counter-cyclical growth during an economic downturn.
What do you think? Feel free to share your thoughts in the comments.
