AKRON-Economists and analysts alike are hoping that consumer ``cocooning'' this winter will yield an economic rebirth in the spring or summer.
Among those expected to benefit from consumer cocooning-this year's buzz word for the phenomenon of families spending more time and resources tending the home fires-are retailers of tires and other automotive services.
With an uncertain economy and nervousness about air travel-courtesy of the events of Sept. 11-consumers are reigning in their discretionary spending and refocusing it on their lives closer to home. An element of this is investing in the family car or cars, since being mobile locally is taking on greater importance, said Steve Girsky, automotive analyst with Morgan Stanley Dean Witter & Co.
Some of this shift in discretionary spending has gone and will go toward new car purchases, especially in light of the 0-percent financing wave and year-end close-out sales, Mr. Girsky said. But at the same time, a spurt in new car sales leads to car dealer lots overstocked with used cars, which are candidates for service.
As an example, Morgan Stanley estimated the average family vacation to Florida costs between $2,000 and $3,000-a sizable sum to be redirected into more maintenance-related endeavors.
Lending credence to those who believe an economic recovery is closer at hand than late 2002 or early 2003 was the release Dec. 28 of three positive economic indicators: consumer confidence, home resales and the National Association of Purchasing Management Midwest (NAPM) index.
The increase in consumer confidence is the first since June, and the NAPM survey trended upward for the second straight month and moved closer to breaking through the expansion/contraction barrier. The NAPM data are leading indicators of manufacturing activity.
Mr. Girsky and others in the financial community are taking a wait-and-see attitude toward tire price increases announced for the first quarter of 2002, especially in light of stable, if not falling, raw materials prices.
The recent political turmoil in Argentina and subsequent devaluation of the currencies there and in other South American countries could open the way for Goodyear, Bridgestone/Firestone and/or Pirelli Tire North America Inc. to source more tires from there, Mr. Girsky noted.
Analysts who follow the tire companies applaud recent efforts to pare down capacity-plant closings in North America and Europe-but say there's still too much capacity if tire makers are ever to achieve reasonable returns.
Replacement passenger tire shipments are expected to slide in 2002 to 189 million units-down 1.6 percent from 2001, which in turn will end up 3.4 percent shy of 2000-before rebounding in 2003 to 197 million units, according to the latest Rubber Manufacturers Association forecast.
Shipments of replacement P-metric light truck tires will suffer a 17-percent drop next year to 24 million units, primarily because of the extraordinary recall-driven demand in 2000, before rebounding in 2003 to 30 million.
Replacement medium/wide-base truck tire shipments should rebound modestly in 2002 and 2003 after suffering double-digit declines in 1999 and 2000.
The joker in the deck could be oil prices. The Organization of Petroleum Exporting Countries (OPEC) has indicated member countries have agreed to limit production in the group's latest effort to drive oil prices up. If they're successful, analysts say, gasoline prices would rise.