Earlier this year, financial prognosticators told us that interest rates would likely rise throughout the year in the UK and Europe at least, however would level off and then start to drop towards the autumn.
Inflation would be rising, thus interest rates from central banks would keep rising to fend this off. However both have been rising and whilst inflation rates have slowed, there has been little relenting on the financial squeeze that most households are facing.
The Bank of England have indicated that higher interest rates are here to stay and could be up to two years…so what affect will this have on consumers and retailers?
In short, this will lead to prioritised spending. Essential items such as food, power and housing will be given greater importance and the high value non essentials will be relegated to the bottom rung.
As an example, automotive manufacturers will feel this more than most and only those offering their customer the best value packages will likely see dividends long term.
Certain manufacturers have seen whole scale drops is unit sales in all markets whilst other premium brands are being hit by stagnant sales, rising costs and continued failures to supply products with the ever present supply chain issues.
It has become the Catch 22 that everyone hoped would never come but is now staring both consumers and suppliers in the face.
Forced rising costs and sales prices that thwart purchasing enthusiasm leading to diminishing markets and market share.
The only way through this is with multinational cooperation at a government level and for companies to be more flexible in product delivery and less anxious about shareholder dividend yields.
For at least another two years with high interest rates may see some manufacturers reaching a critical reduction in mass that cannot be recovered from!