All economic indicators are pointing to a recovery in 2004-but at a staggered rate, experts said.
Throughout the bottoming out of the economy and the conflict in Iraq, cautious consumer confidence and spending have buoyed the U.S. economy. Now businesses are poised to do their part and open their wallets, according to analysts interviewed by Tire Business.
``The economy is on an uptick for 2004,'' said Dennis Virag, president of Automotive Consulting Group Inc. in Ann Arbor, Mich. ``There are a number of indicators pointing in that direction. The business cycle is coming back. And it's a presidential election year-which is always good (due to the influx of cash spent on the campaigns.)''
Michael Walden, an economics professor at North Carolina State University, said ``the retail market was doing fairly well last year. It was one of the bright spots. (Retail) won't see gains like other markets (in 2004). Rather, it will be `steady as she goes' next year.
``The difference in this recession is people did spend,'' Mr. Walden added. ``So you won't see a big surge in spending because consumers have already been spending.''
The big change is in the business spending side, he added. ``Businesses will be spending money on technology, buildings and jobs,'' he predicted. And as businesses start expanding and boosting warehouse activity, ``as opposed to the passenger tire market, the commercial market should be a growth component in '04.''
While the federal government and economists forecast economic growth and unemployment shrinkage in the year ahead, Mr. Walden warned the recovery ``will not be smooth growth. We still are going to have shifting and shuffling in the economy.''
Watts Wacker, a ``futurist'' and founder of Firstmatter L.L.C. in Westport, Conn., agreed. ``It won't be an across-the-board recovery. Some will fair better than others.'' Despite government analysis that the recession hit bottom more than a year ago, ``I think the economy bottomed just before the holidays. There are a lot of industries not participating in the recovery.''
``Profits will be better but expectations are such that people are not hiring a lot-which is not uncommon in a recovery,'' noted Stephen Smith, professor of agricultural and regional economics at Pennsylvania State University. ``It will be mid-year before we know if it is a decent recovery.''
The good news for tire retailers and auto repair businesses is that consumers are holding on to their vehicles for longer periods of time, in spite of low interest rates and auto manufacturer inducements. However, those incentives and the compulsory replacement of leased vehicles are also bolstering new-car sales.
Among durables, such as clothes, cars and appliances, automobiles and automotive care will increase market share of all money spent in that category, predicted Mr. Wacker, noting Americans' unabated love affair with the automobile.
He predicted tire dealers will see better products and design improvements as manufacturers use enhanced technology in everything from tire design to vehicle finish protection. ``It will offer people more opportunity to take care of the car they love and make it like new,'' he said.
As some manufacturers and industries are expected to spend on capital improvements and hiring, Mr. Walden said small businesses could also take advantage of better sales in 2004. ``They should look for opportunities to expand. They should see better profits. It will be safe to hire and replace old technology.'' And it's prudent to hire now when there is still a large pool of qualified, unemployed workers, rather than later when more businesses start hiring, he advised.
Inventory is another area dealers can look at boosting if and when their sales pick up.
``They may want to increase their inventories slightly,'' suggested Mr. Virag. ``You never want to turn a customer away for not having what they want.''
According to a recent report of the U.S. Commerce Department, the nation's manufacturers, retailers and wholesalers already have been building up their inventories since their sales increased in October.
Overall, analysts suggested tire dealers ring in the New Year with cautious optimism. Mr. Virag advised businesses to keep doing what they're doing and monitor business activity and economic surveys, which indicate future business activities.
``Keep your nose to the grindstone. Stay lean. Take opportunistic opportunities for investment,'' advised Mr. Wacker.
And the analysts reiterated the oft-repeated advice for competing with the ever-growing mass merchandisers: provide better customer service.
``As the unemployment rate is going down, so does the service level. It's an economic phenomenon,'' Mr. Wacker said. Likewise, when unemployment rates rise and people want to retain their jobs, service levels improve. ``As we go into 2004, customers have increased expectation of better service. No matter how good the service you offered last year, consumers will expect better.''
To Mr. Walden, the challenge for small dealers is to try to provide quality and service that customers value and can't get at the large volume discounters. ``They need to focus on customer service, such as personal delivery, special orders, product tie-ins-things customers can't find at large volume discounters,'' he said.
Likewise Mr. Smith said small stores, even those located near a Wal-Mart location, will do well if they offer what Wal-Mart doesn't-a niche focus, better service and higher quality product.
``Small business people need to continue to serve customers well and continue to develop relationships with their customers,'' advised Mr. Virag. ``It's the services you provide customers, the satisfaction you build through service, that will keep customers coming back.''