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Furniture sales increased dramatically in Europe because people stayed home during this time or started working from home. This has been instrumental in the recovery of retail spending, according to the Financial Times, which writes that many countries have exceeded last year’s levels. However, consumer confidence remains low in Europe, prices are falling, spending on services remains low, while household economies are growing. If this trend continues, deflation will come in the fall, says financial analyst Iancu Guda, who explains why the effects of this phenomenon can be disastrous in the medium or long term.
“It confirms the appetite of consumers for certain categories of products. It is difficult to anticipate the evolution because it depends on the behavior and emotion of the consumer, the level of comfort when working more and more from home. There is a need for balancing and saving up.
Another trend is the increase in online consumption, which shows a strong migration in this segment, and companies need to think about an online promotion strategy.
Overall, I do not believe that consumption will return to a level similar to that before the pandemic anytime soon, leading to increasing the risk of deflation.
We see the trend to moderate the rise in prices. If the trend continues, in autumn we will reach deflation, that is, lower prices. Apparently, for some it is an extraordinary evolution, especially if we look at it from the perspective of consumers in the short term, but in general, the effects are disastrous in the medium and long term.
Deflation and recession are economists’ worst nightmare.
When the sales of the companies go down and the price also goes down, a company hardly resists, because the production volume goes down, the price goes down too. So most companies have to restructure.
We are happy as consumers, because we have cheap products, but on the other hand there are no more jobs.
The effects on the chain are obvious: increased unemployment, decreased state revenue because there is not so much tax revenue, the state ends up making smaller investments because it has no money. If investments decrease, so does consumption fills in a new level of the growing recessive spiral.
So, the economy will be even more difficult to reactivate. This is the main risk.
It’s time for smart investments. Anyone with an entrepreneurial idea can now start a project. People, ideas and money are needed.
Entrepreneurship, start-up, new business start-up, these are a new beginning. This should be the opportunity that some entrepreneurs should take advantage of, but also those who have lost their jobs ”, explained Iancu Guda.
Edited by Georgiana Marina
