The return to normality is accelerating despite the fact that 'normal' does not mean the same as it did before. In the context of the leather pipeline, 'normal' means the unblocking of supply chains, but in some cases this could require heightened activity to counteract the imbalance created by delayed decisions.

In the past few weeks, magazines, economists and institutions have been struggling to define the present economic situation. Are Europe and the US in recession or not? Are we experiencing zero-inflation, dis-inflation or deflation? Statistics, figures, historical examples and scenarios from around the world are all used to try and convince us of one theory or another. Meanwhile, politicians (when they can disengage themselves from the war on terrorism for a moment) try to reassure their populations that things will soon improve, but in some countries one has the impression they just follow the script of their media advisors in a facile attempt to spread optimism. The result is that consumers everywhere are being pushed into the shops and urged to buy more.

A look at the available data shows an increase in retail sales in the US over the Thanksgiving holiday weekend. In Europe statistical data is not produced as quickly, but checking sales at the beginning of the holiday season they are certainly not much less than a year ago and in some countries (due to the rapidly approaching Euro) may be even better. There must therefore be more than problems related to consumer spending behind the loud complaints currently being made about the poor global business situation.

Why this short glance at the general economic situation, you ask? Well, because many in the leather pipeline relate the general economic news directly back to the situation in the trade. This could be misguided and the information overload needs a thorough examination if premature conclusions are to be avoided by business in general and the leather pipeline in particular. Before dealing again more in depth with this subject, here is a brief overview of the general market situation in the past two weeks.

After the initial stabilisation of hide prices related to side leathers there was an increase in demand for furniture hides, with Italy in particular becoming much more active again. At the end of the period it even seemed that many furniture leather orders had been delayed by too long and a great deal of spot interest was noted. Shipping programs were also accelerated where possible. Judging by rumours from the marketplace it seems that there is even a significant return of American customers. This was reflected by a reasonable increase in prices for various origins and those that had suffered badly in October and the first half of November were able to recover from their lows. This was seen with particular regard UK hides and continental European cows. A weaker Euro helped make hides from the Euro region even more attractive, while orders for finished leathers quoted in US$ became more attractive by the day for suppliers.

Activity for the most part was high in the shoe and leathergoods sector and so demand for these kinds of hides was also good. In the last Market Intelligence (November 19), the price/value spread of many origins was examined with the conclusion that some of the wide gaps seen previously had narrowed. Undervalued hides increased and those which had been overvalued (e.g. US, South German etc.) corrected. A further look at the price structure of hides shows a continuation of this trend with the spread of prices closer in general.

Trading activity was reported to be good in Europe and declining in the Far East - not too surprising considering this part of the world is entering the low point of its seasonal production cycle. The Chinese New Year is also approaching, placing greater emphasis on shipping times.

As previously mentioned, a lot of the interest for hides in Europe was for quick shipments, confirming the impression that those placing orders are looking for swift fullfilment. This does mean that doubt remains for tanneries over their long-term programmes, but confidence is returning for the first quarter of next year and the future in general.

One segment in the doldrums was the extra heavy bullhide for the automotive industry. For some time it seems that these hides have been overvalued and cushioned from correction by the generosity of the car upholsterers, who are the sole buyers. It seems that this support has finally been withdrawn and so prices for this material dropped substantially to be adjusted to the normal market levels.

Lower quality hides in the Southern hemisphere still face buyer resistance in what seems to be less a problem of price than levels of demand. Business in skins seems to be finally slowing down, with split sales remaining steady without producing any excitement. It seems fair to say that for these two items, the business year is cut and dried.

That leaves us with the question of all the cancelled and/or postponed orders from the US in Asia that so many were complaining about after September 11: Were they simply delayed, and what happened to the products already in the manufacturing pipeline? As not too much has been heard about this we would appreciate it if any of our readers can assist with some insight on this subject.

Many consumer and marketing analysts are finding that the consumer in the present economic climate is moving back towards 'value-for-money'. This would tend to boost the mid-quality and mid-price range - so long neglected in many markets. Without pretending that we can ever fully understand consumer or retail markets, it seems there has been a discernible change in consumer behaviour. Those that study this subject are finding that the global consumer with money to burn is moving away from the fancy top price product where a large proportion of the price is normally made up of brand name and marketing marketing costs. Instead he is becoming much more concerned with the quality/price ratio.

This does not necessarily mean that all brand names have lost their lustre, but it does suggest that factors such as product quality and aesthetics are returning to the purchasing decision.

In the low-price sector, analysts also report a shift in attitudes. Here the prevailing wisdom is that customers remain very price-conscious, but they are becoming more rational with their purchases. With the exception of disposable articles, the importance of quality is on the rise. People at the low-end of the market over the last few years have been drawn first by price, then by fashion. Quality and durability were not high on their list of priorities. Now there is the feeling that consumers are becoming much better at analysing which specific product is good for them and then trying to find the example that represents best value-for-money - rather than always going for the cheapest on the list.

One has to conclude that if this line of reasoning is correct, leather products are likely to benefit because of their obvious association with quality. This of course applies to shoes, leathergoods and garments but also furniture. The price pressure felt in the supply chain might not be lifted by this, but at least it should offer those involved in the quality sector a fillip and that has to be good news.