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When did Spending Money Become so Difficult?

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For a successful economy we need consumers, retailers and manufacturers; one to buy, one to sell and the third to make what they want, so far so simple. The tricky bit is for retailers and manufacturers to bring the consumer unique and engaging brands that are desirable. The 'Great Recession' has made this harder, with all three feeling the 'purse strings pinch' simultaneously and with similar pressures. Worse still, costs are increasing even as revenues plateau. So what exactly are these pressures, and do these economic pillars hold any optimism for the future?

Firstly consumers, juggling increasing food, detergent and energy prices along with ever decreasing scope for higher salaries in their current jobs. Changing careers could provide a way out, but risk-averse workers, the majority in our current climate, prefer to stick with what they know unless forced to change by a redundancy, the sad reality for many. However, Minitel's recent July Economic Outlook poll showed 61% of consumers are 'making ends meet' and a fifth of them see their finances as positively healthy. It's not just the employed either, with a full third of retirees saying their finances are in good order.

Then we have the retailer, working tirelessly to be the 'friend of the consumer', offering breadth, value and convenience, though not always in that order. Facing almost a 200% increase in distribution costs over last year, more than half down to drivers and volatile fuel prices, retailers are struggling to pass on their overheads to consumers, especially those championing low prices. The tactic of separating portfolio brands from their private own brands has proved itself, allowing consumers to buy 'value essentials' without compromising on quality and the retailers to continue posting profits. This type of smart strategising has increased consumer trust in retailers and the emotional connections they have with them. Alongside this, retailers are in the midst of rapid and aggressive expansion, planning new capacity, equivalent to the size of Sainsbury's today, over the next few years, albeit in smaller store formats. The economy may be dawdling, but there's no slowdown in ambition amongst retailers.

Finally the manufacturer, diligently creating innovative products and promotions to entertain consumers, creating rapport with them, their brand, and the brand's promises. Commodities and raw materials have soared in price, due in part to wary investors buying these historically less volatile resources, cutting manufacturers margins and raising production costs. But whilst the West has been deep in the doldrums of recession, Asian demand is booming, bringing with it potential long term threats to supply due to behaviour change. As Asians become richer they increasingly adopt a more westernised diet, and waistline, matching our meat consumption. If middle-class Chinese adopt the carnivorous habits of Americans, they will consume 80% of the world's current meat production. In the future vegetarianism may not be a choice, but a necessity, as meat once again becomes a luxury. Does this qualify as a nudge strategy against obesity? But right now, manufacturers continue to rely on discovery, whether that is of unmet consumer needs or of new solutions to old problems; this has always provided their fuel for growth. Now sustainability is in vogue, with company R&D teams looking to create more and more efficient products, cool wash detergents for example, in their quest to protect the environment and the customer's wallet. These advances will add up to an awful lot of energy saved if consumers change their behaviour permanently.

We have been sheltered from these pressures on the economic cogs for many years, but the UK economy is still robust. Despite a temporary setback to our bank balances, most of us talk optimistically about a future of opportunities; of profitable solutions to current woes, and of a media that all too often accentuates the negative before eliminating the positive. Only through positive action and energy will our economies return to growth. In the meantime, the world's economic fuel will come from Asia, reaping profits now and growth in the future. Asia is not quite yet the world's economic engine, but its boom is keeping the world economy out of recession, and long may it do so.