Is there a disconnect by business leaders expecting 'pent-up demand' to explode soon?

[IDemo]

The reason I ask is I have seen this phrase used in economics stories a couple of times recently. But yesterday I got a first hand look at how wrong the expectations may be that consumers are merely waiting for a bit more of an economic uptick before their "pent up demand" for goods provides that extra kick to the uptick.

In a meeting with the vice president, he stated that the product our division develops will see much greater sales before the end of Summer because consumers have a tremendous "pent up" demand for electronics. To help make his point, he asked the roomful of engineers, about 50, how many were going to order an iPad. Now, these are people whose working lives revolve around creating cutting edge technology and gaining the satisfaction of seeing the results of their labor do well in the marketplace.

Two out of the fifty raised their hands. That's only four percent of an admittedly small survey size, but of a group of folks most would identify as uber-geeks. One of them said "Oh come on, people!" I think his disbelief was likely shared by the vp, whose point was not well made.

Are consumers, including the normally reliable ones; well paid, aware of the latest tech, simply backing away from their old habits and saying "no more"? Oh, I know the religiously faithful have rushed to get their hands on these things, but they're kind of the outliers in the market.

Thoughts?

[Cronus Protagonist]

1. Maybe the iPad wasn't a good choice

I won't spend a dime on anything Apple, for example. But I will, this year, be buying a health insurance policy that I cannot afford. Maybe he should have used that as an example instead of a giant cell phone.

[LeftyMom]

2. Unless there's some "pent-up money" nobody's told me about,

I'd say they're on drugs.

[grantcart]

9. There is a lot of pent up money

In a recession like this there is a tremendous burden on a large number but still a minority of the population. The rest of the population is effected by concern and lack of confidence and tends to reduce their pruchases.

When confidence returns those families that have not had any reduced income now have extra cash to spend and will usually spend it on deferred long term purchases of durable goods.

[LeftyMom]

14. I doubt it.

A whole lot of people have had reduced business, cut-back hours, extra expenses associated with helping out (or taking in) laid-off family members, etc. In the wealthier classes investors have taken it in the shorts. Middle income folks are no longer able to count on retirement money and such they thought they had accumulated, and have had to readjust to compensate.

Almost nobody is untouched. Even people in supposedly "recession-proof" lines of work are in trouble.

[nadinbrzezinski]

18. Actually even during the worst of the depression

people still spent money.

So yes there is money, how much it is a good question, but economic indicators, not what you see among your neighbors, don't lie. The sale of durable goods, see things like cars and dishwashers, are on the way up. It is up by 0.09% in the month of January and the trend is up.

So it doesn't matter if you doubt it, people are starting to buy these goods.

This is why I like to keep my eyes on actual indicators and not just my personal experience.

By the way, you have noticed that jobs trend into the positive territory, right? Well that means that as people feel better, they will spend even more money. This is the way it works, every time, even during the Depression.

[sendero]

45. Yes and it is typical..

... don't fall for the idea that an uptick is necessarily sustainable. Spending does not fall straight to the bottom, people DO get "frugality fatigue" and start spending again.

Look at almost any long term depression and you will see uptick periods.

Nothing has changed, and without a serious and sustained increase in employment nothing is going to change.

[sandnsea]

26. Those families don't exist anymore

There's the unemployed who will be devastated for at least 5 years.

There's the employed whose homes are now worth half and they are still trying to make those payments, and not spending any extra money because their retirement can no longer rely on that house.

Then there's the employed who homes are now worth half, who can't get money out of the house to pay off credit cards, so have no disposable income and won't for years.

Then there's the under-employed who never did own a home, but did have a credit card but are working diligently to pay it off because the interest rate is now somewhere around 30%.

Then there's the bottom of the pile who only buy when they get their EIC, which they just got which might account for a bit of the bump we're getting.

This isn't like other recoveries because we have had a credit economy for thirty years.

[whattheidonot]

33. not this time.

we will not spend our way out this time. The measures being taken are way too timid to effect the economy. The corporate free ride is killing us. We need lots more employment and better wages. we now have a no demand economy. Obama has been way to slow to move Main Street. We need serious change and it is not happening. Even health care was a comprise job we will pay for. For profit is fine but it does not always cut it. Until someone puts some serious heat on the corporations the economy will suck for all except the shareholders. At some point the no demand economy will force their hand. You can have the best shop in town but if you have no customers you will close.

[sandnsea]

34. There's no money to spend

And these families aren't going to have any, which I tried to depict in real world terms to someone who thinks more like a macro-economist.

We do need better wages because people aren't going to have the credit to buy for quite some time. Obama can't do anything about that. People are going to have to start fighting for those wages on their own.

He can do something about creating an economy through targeted tax credits, the way Clinton did with computers and the internet. That is what Obama is doing with clean energy and weatherization of homes. When people start having the money to buy those things, the economy will start turning around. It would help if people who want this to work would get excited about these new green technologies and blather about them all day long.

Obama has said he does not want to create another bubble economy and consequently is trying to ramp this up rationally and get people thinking about investing in products and sound business principles again, and not the latest get rich quick scheme.

[quiller4]

30. That returning confidence if what has caused sales to pick up.

A year ago when firms were announcing layoffs, people were fearful that they would be cut. People who held on to their jobs through the period of massive job cuts now feel their positions are safe and they are buying again.

In my region that has translated to an increase in home sales, pretty dramatic increase in car sales and sales increases at mid-range department stores like Macy's.

Charitable giving is picking up, too. As a volunteer, I do the bookkeeping for two local non-profits. Both saw double digit declines in giving through 2009. For the first quarter of 2010, giving has returned to or exceeded levels set in 2007 and 2008. That is true at my church, too. In 2009 annual giving was down 17%. For the first quarter of 2010 it is up 32%.

None of that is to say that unemployment isn't painful. It is for the 9% in my community who are still unemployed. For the 91% still working, the fear is fading and they are buying and giving again.

[nadinbrzezinski]

3. Two thoughts

we geeks who have been critical of what the IPAD does not do have been ahem dismissed as well geeks, and techies. Your friends might be in that category.

There is also the chance that the IPAD is not the greatest thing since sliced bread and for some reason people have actually figured this out.

That said, time will tell.

But your admittedly small sample, from what I have read, we geeks are not that impressed.

That said, we will know not in two weeks, but two years. It took that long for Mac to realize that the MacBook Air was not doing well.

Now I expect them to try a little harder with this toy... assuming it falls in the category as the Air, and for the record... the Air came out in good economic times.

[IDemo]

21. Yeah, I'm not sure he should have specified 'iPad'

Maybe a better question would have been "how many are planning on a major electronics purchase soon?"

I think among many engineers/techs, who may actually enjoy being able to get 'under the hood' of a PC, the hands-off nature of the iPad and most Apple products may be a put-off. Don't get me wrong, they look like some terrific devices. Just not for me, and apparently, almost all of my co-workers.

[nadinbrzezinski]

27. I love my Macbook

maintainance free, but still do the IT for the Windows systems here, as hubby IS a gamer.

But to be honest, if it wasn't that the IPAD is overpriced for what it can do, I'd consider getting one for hubby... as a GAMING machine, and book reader for school. Though the latter, he hates readying on the screen

but your boss made a mistake in mentioning the Pad, since techies generally speaking, are under impressed, and even the boosters noticed that.

Overall we geeks have been overly critical. And truth be told, if it survives to second gen, or even third, that will be the time to consider perhaps, getting it to replace my netbook. It would never serve the role of a main laptop, but neither does the netbook.

And it would be nice if it was expandable. Oh wait, there I go with my major gripes.

[sendero]

46. Whether the iPad...

.. is or isn't the best product of its kind isn't the question, the question is who needs an electronic reader?

I'm as techie as anybody and I'll tell ya, I have no use whatsoever for a Kindle or an iPad - they are solutions looking for a problem.

[DJ13]

4. That sounds like wishful thinking

Or, if that company is publicly traded in the stock market it could even be outright dishonesty related to their vesting period for options the executives were granted in lieu of bonuses.

[jody]

5. IMO unemployed workers cannot be rehired until bloated inventories are depleted. That will occur

very slowly as long as government keeps interest rates low making the cost of carrying inventory, that easily could exceed 20%, artificially low.

Under those conditions those holding products have little incentive to reduce prices that under normal market conditions would reduce inventories.

On the other hand if one believes that an omniscient, omnipotent government can do a better job of managing production and the market then soon workers will return to work and we will all live happily ever after.

[izzybeans]

6. They need to flip their focus because the jobs they cut deplete demand.

Recessions are self-inflicted. Meanwhile cash on hand at businesses are at record levels. The pent up demand is in their budgets and in the labor market. Nothing happens until they get off their duffs and hire people to build shit, sell shit, so that we can continue to eat the shit.

[jody]

7. Some recessions are simple adjustments in the market to forces that artificially bid prices much

higher than their intrinsic value to prospective buyers.

[notesdev]

8. Anyone who thinks the economy is due for an uptick

must be living in VERY isolated circumstances.

I live in a town where in the recent past, conspicuous consumption was all the rage. Now stores can't move inventory even with huge sales, and when I talk to people they talk about problems managing finances instead of their latest cool toys.

Who's going to be spending this new money? Not the steadily growing ranks of the unemployed, that's for sure, and the bond market is telling the government that its credit limit is approaching rapidly.

[jody]

10. Agree 100%. n/t

[sendero]

47. Exactly..

.... the next wave of bad news is going to be cities and states laying off massive numbers of people. This is not a "maybe", this is going to happen as large proportions of these entities are collecting much less tax revenue and they cannot run a long term deficit like the Federal government can.

The single factor that makes this downturn different from most that have come before is jobs. There is no such thing as a "jobless recovery" except in the mind of a moron economist. And since most "economist" never saw this coming I feel moron is a pretty apt term to describe them.

[RKP5637]

11. Given this economy, and that major product strides/gaps are not as dramatic as in

years past IMO there is not a pent up demand. I also think many have become saturated with electronics. I have to imagine that many comfortable in a job/position today still have a nagging feeling of "what if" I were let go... it well might be conscious or unconscious, but I think it is there until a sustained proof is evident that this economy is stable, as well as jobs/opportunities. I've been there in hi-tech and that would be my feeling today...

To me, "pent up demand" is a feel-good phrase for those on the line for product bottom line results.

[charlie]

12. 30 years of trickle-down

and an ever increasing share of GDP built on paper-flipping, and these clowns are surprised there's little left to wring out of the unwashed masses? I swear, there's nothing more delusional than neoliberal economics.

[RKP5637]

15. +1000, n/t

[annabanana]

44. How can this be so obvious to so many, and yet completely obscure

to those who made economic decisions for this Country?

[JHB]

48. "It is difficult to get a man to understand something...

...when his salary depends upon his not understanding it" -- Upton Sinclair

[jtuck004]

13. There are lots of people who haven't figured out

that if you have 26+ million people unemployed, 1 of every 4 homes loans underwater, a fair amount of troubled commercial real estate and a country that has switched it's wealth creation mechanism from manufacturing things people want to creating money from hot air produced by finance people who don't create diddly squat, that you have a whole lotta nuthin'. The only pent-up demand is for work and income.

Unless we start trading turtle shells, or the people with the pursestrings put unemployment (and the resources used to curtail it) on a par with war or bailing out those helpless banker folks, there exists a terribly small group who might have enough disposable income for an Ipad. And of those, how many really need an astronomy app?

[IDemo]

16. Agreed with all you've said n/t

[RKP5637]

17. My feelings too! The well has been pumped dry. n/t

[SocialistLez]

37. +1

"The only pent-up demand is for work and income."

A-FING-MEN!!

[Turbineguy]

19. There's always pent-up demand

We have become pawns to advertisements directed at a super-saturated market. Demand is created. It would not exist on its own. A seed is planted and nourished. It results in a sale. A happy customer is a bonus and eventually ready to upgrade. Products are advertised to remind customers to be happy with it but at the same time consider the replacement.

[2Design]

20. w/o house ATM - people no longer have the money n/t

[eilen]

22. i'm someone who loves her mac and iphone

however, I'm not planning on purchasing the ipad. I love sewing machines and there is a really nice one coming out-- however, I'm not trading in and upgrading. My choice is to buy used when I can. About all I spend on are cheap used exercise dvds now.

Particularly with the gas prices and my car needs brakes.

[sandnsea]

23. No credit, no "uptick"

We will probably settle into a nice doldrum for many years, but no economic collapse. When the shareholders finally figure out they've got to give the workers enough wages to buy products with, then maybe things will start to really grow again.

Still, a nice dull economy isn't the worst it could be.

[DJ13]

29. When the stores and/or manufacturers begin self financing like auto makers

with no down, near zero % interest, several years to pay loans, THEN we might see a renewed buying cycle that can actually spur increased employment and economic activity.

But the major retailers are so dependent on high interest rates their revolving store credit cards have brought them the last 20 years that weening them off that revenue stream is next to impossible.

[icnorth]

49. "Give workers enough wages

to buy products with?" That is such an anti-establishment/Un-American/liberal/socialistic attitude comrade. ;)

[SoCalDem]

24. "Demand" is all but gone..and perhaps for a very long time.. Buckle up, folks.

Decades-worth of unnecessary jobs/businesses have come to an end.
Posted by SoCalDem in General Discussion Thu Oct 15th 2009, 07:47 PM


This is what's at the crux of our next problem.

We (the US) are no longer the driving force in the world. We no longer make & provide the necessities of life for the world.

When we stopped BIG manufacturing, on a grand scale, we switched to a "make-work" economy, where paper-pushing, phone-answering, consulting, counseling, tending-to, etc., became our "new way".

We were all told that manufacturing was dirty, time-consuming, back-breaking work...it polluted (it really did), it was costly to maintain and innovate all those creaky old factories, and our "colonies" abroad could do the work for pennies on the dollar...YAY!! cheap stuff.

The manipulation of currency and trade deals and so many other financial shenanigans drove this runaway bus, but it's finally run out of gas, and there are so many enterprises that will never be coming back, and so many jobs will never return either.

We can accept the fact that the fantastic steel mill wages & UAW wages and so many other "good" jobs will never again be here, but even the cruddy soul-sucking desk/cubicle jobs are scarce now.

We overdid it, because so many people had to have an income, and that meant there had to be jobs for people, even if they were not "necessary" jobs.

Those of us who are older, have a reference point to gauge the changes.

A town of 20-30K used to have a few shoe stores, a few good department stores, a couple of grocery stores, maybe 2 or 3 theaters..There was competition, but there was also enough business to support all (or most) of these businesses. Many were businesses that had been there for 50 year or more, and had supported families, employed people, and prospered. They were NOT 110K sq.ft./jammed to the rafters stores. They were modest family businesses. The owners did not "borrow to meet payroll". they paid for their merchandise with the 10-day-discount, they saved their profit, for lean times, and they did not loot their businesses for their own gratification.

Everywhere you go today, things are exactly the same, all towns have the same stores, restaurants, etc. People all work for the same bosses, because a precious few own everything. Entrepreneurs start a business, it prospers a little, and they immediately look into selling it for "big-bucks" to a corporate cannibal, who guts it, lays people off, and passes it on to the next corporate cannibal, looking for a write-off. The customers & employees of that company just fall by the wayside.

There is more to business than just price-cutting and undercutting. People have basic needs and they have wants & desires. Businesses crop up to satisfy these needs & wants, but when there are too many places offering these goods & services, there's not enough demand to keep them all afloat.

People are lazy, and they like to get everything easy. It's no wonder that the shopping center idea took root in the 60's & 70's, but too much it still too much.

We were all better off when we had fewer "choices", but those choices were goods made by, transported by, sold by our own fellow citizens, and the commerce was spread around to everyone along the line. Money circulated and it made stops all along the ladder..top to bottom.

Progress always puts someone out of business, but hyper-progress and mass consumerism has put millions out of work, and millions more deep into life-crushing debt..and lowered wages for most of us.

What's next?

Where will all these unemployed find work?

house building-selling-furnishing? unlikely anytime soon

will 45-60 yr olds "go back to school" so they can start over? unlikely

just how does a 24 yr old saddled with 40K of school debt, ever get out of debt in time to start a life?

If 35-40% of income goes to put a roof over your head and 30% is "acceptable" for medical COVERAGE (not the actual medical procedures), how does the remaining 30% lead one to a comfortable lifestyle?

all questions & no answers yet..

stay tuned..it's going to be an interesting docu-drama

[Greyhound]

25. Anecdotal but I've experienced a tremendous surge in inquiries for

econoputers (very low-cost computer/appliances). It's been ages since anyone's even inquired about the latest-greatest-bleeding-edge tech. Some interest n SSD's but the capacities/expense are still too far out of line.

Oh, and the looks of joy I see when I show the computer-illiterate Ubuntu and tell them it's free.

[nadinbrzezinski]

28. And Ubuntu works very well too

:-)

But installing it on my netbook would require I get an external drive, or figure out how to put the ISO on the thumbdrive....

That said, windows seven works pretty well for what I use it for... and it came with it

:hi:

[Greyhound]

35. They've got you covered, here's the link...

https://help.ubuntu.com/community/Installation/FromUSBStick

People say windoze 7 is better than vista (but my first OS project in college was better than vista), but it doesn't DO anything new or better except require expensive, unnecessary hardware, and suck more $$ out of your pocket.

[nadinbrzezinski]

40. The netbook wasn't that expensive

and I got on it exactly what I need.

It IS a glorified word processor.

As to working better than Vista... well IT IS SP 2 for Vista... go ahead, call me a cynic, I am.

There is one more reason I would not go ahead and change the OS though. I got a couple sweet programs that run FINE on both Mac and Win... but I have my doubts would run on ... Linux, or perhaps they would, but you know what I mean.

[RKP5637]

31. +1, n/t

[Odin2005]

32. Are these people so stupid they have started BELIEVING their own lies?

Christ, we are SOOO screwed...

[SocialistLez]

36. "The new normal"

People have gone without so much...they've gotten used to it.

I see no need to WASTE my money on an iPad.
I will be buying things that can prove VERY useful for me such as say a GPS for my car because I'm tired of getting lost every time I go out of town.

I don't think there will be a lot of demand for a lot of products until we see the unemployment rate at about 5-6% and I mean REAL employment. A lot of people getting jobs these days aren't getting the kind of jobs they want and it's not like there is a lot of job security. Hell, even hospitals around here are having a hiring freeze but we're constantly told health care jobs are the jobs of the future.

I don't think the iPad is the best product to use. Knowing Apple, they'll have a "new and improved" version out in about 6 months so why rush out and get it now? In a few months it will be "old news."

[NNN0LHI]

38. Not too many people are buying stuff just to to be buying stuff anymore like they used to

I know I am not. People are saving again. And this is a good thing.

But things wear out. People have been patching up their old appliances and cars for a long while now. I know I have. I want a new car real bad. But I don't want to go in debt right now. Its probably going to take a major breakdown of a transmission or engine before I get a new car and go into debt again. But that will happen sooner than later. Its inevitable. Our kitchen appliances are really old too and I am sick of looking at them but they are still operating so I will keep them for a while. If they start nickel and diming me to death I will get some new stuff.

I am sure that the companies that build this stuff know about how long it is going to last and they use some kind of formula to predict upticks in sales. Probably not real accurate. But in the ballpark anyway.

Don

[Egnever]

42. I think your post nails it.

[Marr]

39. I've been shocked by how pervasive the bad economy is.

People are feeling it at all levels, it seems. The people I know who are in retail are seeing shortened hours and lower sales, and people I know in much higher paying fields like corporate law and insurance law have almost all been laid off. I'm in advertising/design myself, and I've watched budgets being consistently lowered, and the number of projects lessened over the last several years. It stinks out there.

[Greyhound]

41. Your reaction has been common to my experience as well, people

are shocked. Unfortunately, shocked though they are, the scale and severity of this disaster are determinedly ignored, it's a s though we've collectedly decided to shut our eyes and hope it goes away.

Perhaps people have been sucked in by the stock market, or the 24/7 happy-talk, but the world economy collapsed a year and a half ago and we are alone in the world in ignoring that and pretending that it's all better now. Detroit is dead, California's economy has contracted 25% and it's tax base is disintegrating, banksters are hiding bad loans while another interest reset is right around the corner and the "federal" branch office of Goldman-Sachs is threatening a rise in interest rate while thousands more foreclosures are thrown on the pile every day, and we haven't even started to see the unwinding of the commercial real estate market yet...

Sorry, I get a little enthusiastic about this stuff because it is going to be such a horrible shock to so many people.

I know the administration is desperate to push every little ray of sunshine, but telling people that the hurricane is over and it's safe to come out now is just irresponsible, IMO.

[Hannah Bell]

43. income dropped last quarter. not sure where they're seeing the demand.

must be the top 20%.

[KharmaTrain]

50. The Credit Crunch Says Different...

The mass consumer society we enjoyed for years was built on a deck of cards...easy credit that led to the massive debt bomb that still hangs over this economy. Unless you have the cash, you're only going to spend if you absolutely have to. High interest rates also are a killer as people aren't going to charge things that come with a 15 or 20 or 25% interest rate attached to it. Without a restructuring of the debt, revisions on interest rates and allowing those worthy (meaning not in massive debt) to get credit, the consumer economy not only won't recover, but will continue to shrink.