Improved transactions between businesses are often an indication of economic rebound, according to Jim Swift, the founder of Cortera, a firm that specializes in providing credit information. As entrepreneurs in the formal and informal sectors resume operation this week, the insight should serve as guidance for effective post-lockdown planning.
Jim said increased business-to-business spending normally precedes drop in unemployment rate and recovery in discretionary spending. For him, the improvement “indicate that businesses are starting to invest in growth and should also mean new jobs.”
While many countries placed restrictions on business activities and movement of people, global economy has slumped significantly. Businesses are filling for bankruptcy, cutting employees salaries or laying sections of their workforce off. Like businesses, consumers are cautious and holding tightly to whatever savings remain.
Without a boost in consumer confidence, a function of total easing of the lockdown and massive deployment of cure or preventive medicine for the COVID-19, many sectors will have to keep a low profile.
Discretionary spending is expected to be low for some months until vaccine or treatment is found for the pandemic. However, if consumers do not show signs of relief, businesses cannot increase order or inventory.
Now non-food and non-health sectors are expected to experience some headwind. Entertainment, sports, management consulting, luxury clothing, automobile, recreation and hospitality will need to pay attention to increase spending in other sectors before effecting planned expansion such as hiring and inventorying. This caution should forestall unwanted losses and frustrations.