Art business as economic barometer

Our business has been operating since 2010 and in these 16 years I have found myself drawing on those economic classes in college more and more. Simple principles like supply and demand, economy of scale, and the impact of inflation play out daily.

Since Covid we have noticed quite a downsizing of spending… but then again groceries are so very pricey, and let’s not speak of gas for the car!

Here’s a brief summary:

The relationship between the economy and spending is usually described through income, prices, interest rates, confidence, and credit conditions. In general, when the economy is strong (more jobs, rising wages, stable inflation), households and businesses tend to spend more; when the economy weakens, spending often slows. But the strength and timing depend on which type of spending you mean (consumer vs. business investment vs. government) and how constrained people are (savings, debt, access to credit).

How the economy affects spending

1) Income and employment (households)

• When employment rises and wages grow, households have more disposable income, which typically increases consumer spending.
• When unemployment rises or hours/wages fall, spending often falls or shifts toward essentials.
• Even when incomes don’t change immediately, expected income affects spending decisions (e.g., fear of layoffs can reduce purchases).

2) Prices and inflation (real purchasing power)

• Inflation reduces real income if wages don’t keep up, which can force households to cut back.
• Conversely, disinflation can relieve pressure and allow more spending.
• This shows up in correlations between spending and measures of real income (not just nominal income).

I opted to not even dive into the availability of credit or how business decisions impact us.

Needless to say I can see impact of economic downturn on my own business. How about you?