``Steady as she goes'' could well sum up the economic forecast for 2005.
While the 2004 economy enjoyed increased job growth and consumer spending, this economic recovery is expected to glide along at a modest rate next year, according to some analysts.
``Overall it will be another year of economic growth,'' predicted Dennis Virag, president of Automotive Consulting Group Inc. in Ann Arbor, Mich. ``There will be continued improved sales of new and used cars. It will be a good year for tire sales.''
A major factor that led to the 2004 recovery was ``modest, yet healthy'' job growth, according to Michael Walden, an economics professor at North Carolina State University, adding that an improved job market is crucial to overall economic health because ``jobs bolster both household income and consumer confidence.''
Job growth is expected to continue at a slightly slower pace in 2005, he said, which translates to a modest increase in consumer spending. However, he noted, the U.S. economy ``is continuing to undergo significant restructuring, so there could very well be major corporate start-ups, shutdowns and mergers which affect jobs and incomes during the year.''
Part of the 2004 recovery was due to the federal tax cuts taking root, according to Mr. Virag. ``A lot of people underestimate the impact of (the events of) 2001. It had a major impact on the economy. It's amazing we did as well as we have.''
Mr. Virag predicted consumer confidence will continue to improve as the economy gains traction. But as fragile as consumer confidence is, tire dealers can take satisfaction in the fact that no matter how much-or how little-consumers want to spend in a given year, they will always have to buy tires when their old ones wear out, he noted.
A trend that has helped boost the tire-buying need is that since the terrorist attacks of 9/11, more people are opting to drive around the country rather than fly, he said. Despite a year that saw skyrocketing gas prices, people still chose to drive to avoid the security delays and high costs of air travel, Mr. Virag said, adding that he considered the high gas prices as ``a blip on the radar screen.''
Consequently, more drivers on the road and more miles driven equate to more tires sold.
The commercial tire market also should continue to fare well, as the commercial market is related directly to the economy, Mr. Virag explained.
``The more goods that are bought, the more shipping there is, particularly by trucks on the road,'' he said. ``You know there is good growth by the number of tractor-trailers on the road.''
While tire dealers rely on people replacing tires on their old cars, they shouldn't be too concerned about the continued splurge in new-car buying.
``New car purchases are driven much by prices,'' Mr. Virag said. ``As long as the OEMs have what I call `ridiculous' incentives, there will be more buys.''
But he added that as more new cars are purchased, more used cars are available for sale and the demand for tires will still be there.
High-performance tires will continue to be the fastest growing segment, he predicted. This is tied to the growing job market. ``When consumers have more jobs, they are more willing to spend.... As long as the economy improves, we'll see continued growth in that segment of the tire market,'' he said.
He also noted that the trend is a bonus for tire dealer sales-performance tires have to be replaced more often than regular tires.
Watts Wacker, a ``futurist'' and founder of Firstmatter L.L.C. in Westport, Conn., agreed the performance tire market will continue to grow next year, citing the popularity of the higher-horsepowered ``personal race car,'' such as the Dodge Viper, Ford Mustang, Pontiac GTO and various Mercedes and BMW models.
While tire sales may flourish for independent tire dealers, the large discount chains will continue to be an ominous presence in their lives.
``There will always be a segment of the population that buys on price,'' noted Mr. Virag. ``Small dealers should not try to compete on price. They should provide exemplary service.''
Word of mouth helps attract customers, he added.
But small stores can find an even playing field on the Internet, suggested Mr. Wacker. He noted that consumers are more confident of the Internet and are choosing to do more online shopping.
``Now mom-and-pop stores can project the image of being just as big as any box store on the Internet,'' Mr. Wacker said.
He noted the retail market is ``over-stored'' and so while overall retail sales are growing, especially via the Internet, the large department stores are not faring as well. ``It's much easier for the small guy to look big, than for the big guy to streamline his operations,'' Mr. Wacker said.
But his advice to small retailers is ``never give up on loyalty.''
``With all the technology, it makes us much more appreciative of service,'' he said, adding, ``it's cheaper to keep a customer than to get new ones.''