• Global Investment Research
    • Demographics

The off-peak economy

  • Article
  • Pricing behaviour and changing demographics are supporting a boom in the ‘off-peak’ economy…
  • …which should help the economy run more efficiently…
  • …though may mean some consumers face more price pressures

Making better use of our scarce resources

The notion of peak and off-peak pricing and availability has been commonplace in many parts of the economy for a long time. But several trends are emerging.

Firstly, pricing behaviour is becoming much more dynamic, with a wider range of services offering pricing to encourage spending into non-peak times.

Secondly, the share of the population able to consume during off-peak times is rising quickly due to a combination of demographic change, more flexible working patterns and a growing share of workers in non-‘nine-to-five’ work. All these trends look set to intensify in the coming years.

What does this mean? Firms clearly want more off-peak custom – it smooths out demand and stops bottlenecks and means that staff are more likely to be fully-employed rather than having down-time. This should mean increases in productivity of assets – a potential efficiency boost to the economy.

1. We still have rush hours…; 2. …but they’re less busy than before

It should also alleviate bottlenecks in the economy. We wrote back in 2019 that peak-time travel creates unnecessary wastage in the economy, and we’re seeing progress here with travel times becoming more evenly spread outside of peak rush hours since the pandemic. The same is happening with travel, with holidays shifting away from peak summer months.

Spending habits may become harder to track, however, with a greater share of spending volumes enjoyed at lower ‘off-peak’ prices. Whilst there is a gap between peak and off-peak pricing, we may see spending volumes grow, but in a non-inflationary way, if this is simply demand filling the spare capacity in the system.

However, a downside risk is that a positive story for the economy in aggregate could mask growing price pressures for those unable to participate in an off-peak economy, especially as those who work full-time, and in-person.

But, overall, this is a potentially positive step for the global economy. We could remove some bottlenecks and make scarce assets or labour more evenly employed, removing downtime and underuse, with this more optimal use slowly increasing output and lowering prices.

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