Is this the time to increase prices?

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IT may be a coincidence that within two weeks, we have news of two sets of price increases even as the economy is not expected to improve anytime soon.

The first “salvo’’ was when banks decided to raise hire purchase rates on car loans. That impact is not expected to be widely felt as firstly, not everyone will be buying new cars and secondly, the margin of increase may not be very significant for those who can afford.

But when chicken prices were also raised, a lot more are going to feel the effect. Already, those retrenched or employed for only a few days per week would probably be living on their savings and part-time income. When prices of necessities go up, they would be among the first to feel the pinch.

From the reasons offered for these price increases, it appears that they were just waiting for things to look a bit better or stabilise, and then drop the bombshell. The main reason given is that costs have gone up. and they have been absorbing it.

In the case of hire purchase loans, intense competition during boom times had driven rates to very cheap levels. It was a volume game and the euphoria was great. Many had overlooked the need to pull the brakes.

Enter the bubble and that game is down with shrinking demand. Now that car sales are expected to ramp up in the second half, it appears to be an opportune time to hike the rates and at the same time, pull borrowers more towards the shorter tenures.

Currently, fears over the influenza A (H1N1) outbreak is causing prices of other types of meat to go up. This is reminiscent of the earlier experience of traders inflating their prices following the drastic petrol price hike.

Higher fertiliser prices and a host of other factors are being cited for the hike in chicken prices which surfaced at the same time that consumers are largely avoiding pork.

Over the next few weeks, as the bullish sentiment spreads from the active stockmarket, it will not be a surprise if more business sectors come forward to raise prices, with the probable reason that they have been absorbing the costs all this while.

They should be reminded that this is not the time to unleash their costing onto the public as pay packets are still in a generally shrunken state and will take some time to recover.

This is not to say that consumers are putting up a “sob story’’ to avoid paying. It is just that merchants should not take the slightest advantage to impose price increases.
 

Source: The Star