How people respond to financial slumps

picIn a move that few will consider surprising, South Africans are turning their vehicle purchasing toward the second-hand market. as IOL reports:

“With new-car sales continuing to decline (617 000 new vehicles were sold in 2015 compared to 714 000 in 2005), used-vehicle sales continue to climb. According to Jeff Osborne, head of Gumtree Automotive, the ratio of new cars sold compared to used cars sold was roughly 0.5 used to one new in 2005 but has since risen to 1.7 used cars sold for every new car sold.”

This is unsurprising to anyone who is aware of the current economic climate around the world. The fact that more people are looking at pre owned cars in South Africa rather than new is to be expected when the American Dollar to South African rand ratio has been this low; indeed, the lowest it’s ever been. This already began happening toward the end of 2015. As the BBC reports:

“South Africa’s currency has fallen to an all-time low against the US dollar.

It briefly hit a rate of 14 to the dollar amid concerns about the strength of the Chinese economy, reports the Reuters news agency.

Economies that rely on the sale of commodities – such as South Africa’s – have been hit by the slowdown in growth in China, a major source of demand.”

People have to often rely on interventions when hit by challenging economic climate; this means altering their spending behaviour in ways they didn’t have to beforehand in order to make ends meet.

This is concerning given the facts of what the world is dealing with, in terms of finances. In a report in The Globe and Mail, the authors note that the International Monetary Fund “cut its forecasts for global growth by 0.3 percentage points to 3.5 per cent this year and 3.7 per cent next year.”

That makes it four successive years of growth below what has historically been considered its “trend” rate. Contrary to what we might think, this actually suggests the economy is getting further and further away from returning to full capacity.

“The recovery is also becoming increasingly uneven. While the IMF raised its forecast for the United State.”

This doesn’t just affect those who run big corporations – but the average citizen who is trying to balance a life and paying taxes to governments themselves struggling. Cost-cutting should, in general, be a motivation for us — regardless of the financial climate: but given these details, now more than ever, we should begin making harsher evaluations on what is necessary and what is indulgence.

 

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