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March 12, 2009

Do some businesses gain from a recession?

The news hasn't been good for consumers or businesses. Just like consumers, many businesses are seeing their sales and income fall, and bankruptcies have risen. But can any type of business actually thrive during a recession?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Yes, there can be businesses that benefit from a recession. What they do is they benefit from changes and how consumers spend their money. I think it makes sense that during a recession consumers will try to shift to cheaper brands, cheaper products. For example, they'll eat out less at full-service restaurants, perhaps eat out more at fast food restaurants. They will keep their cars longer. They won't buy new cars. And so in both of these examples, you can see that some businesses may gain. For example, if people are keeping their cars longer, that means repair shops probably are going to do more business. So we typically see auto repair shops do better during recessions. Again, in the restaurant business, we see the full-service restaurants perhaps take a hit, but you may see the fast food, lower-priced restaurants actually do better. And again, this is all due to consumers trying to get the most out of their money and shifting how they spend their money. And those businesses that benefit from that shift actually can do well during a recession."

Posted by Dave at March 12, 2009 08:00 AM