The well-worn phrase, ``cautiously optimistic'' may find favor for yet another year for economists trying to predict 2005's economy, yet some tire dealers are focusing on their own businesses for prosperity.
In its recently released economic forecast, the Bush administration projected gross domestic product (GDP) growth of 3.9 percent for 2004, down from 4.4 percent in 2003. GDP growth is expected to continue slowing, hitting 3.5 percent in 2005, 3.4 percent in 2006 and eventually 3.1 percent in 2010. The unemployment rate, however, also is expected to fall to 5.1 percent by 2007 from 5.5 percent in 2004.
In 2005, the administration projects the economy will add about 175,000 jobs per month-or about 2.1 million for the year. But that estimate is revised down from last year's forecast, when the administration expected to add 2.6 million jobs in 2004 and 3.6 million in 2005, according to reports. Instead, 1.3 million jobs were created through November, according to news reports.
George Dagnino, chairman of Akron-based Peter Dag Strategic Money Management and former chief economist for Goodyear, said the economy's strong growth likely peaked earlier in 2004, and growth has been slowing since.
``From that point on it's been slowing down,'' he told Tire Business. ``It's still strong but gradually slowing down.''
Mr. Dagnino, who said 2004 grew at an average rate of about 3 percent, expects fairly slow growth of only around 2 percent in the first half of the year. That could pick up if the dollar regains some lost ground-it's down about 50 percent against the euro since 2002-but that scenario seems unlikely. Still, Mr. Dagnino is not sure if another recession could be on the horizon.
On the bright side, he said tire dealers may get a respite from rising tire prices from manufacturers in 2005. With a general slowdown, costs of commodities might have reached their peak, giving some relief from rapidly rising costs. But Mr. Dagnino admits some tire makers still may want to raise prices because of slow business.
``So they are always going to tell you, `But our prices are high,' thinking about (prices from) six months ago,'' he said.
Tire makers have been vocal about rising costs. Goodyear, for example, expected raw material prices to rise 9 percent in 2004's fourth quarter, followed by a 4-6 percent increase in 2005 on top of a 5-7 percent impact overall in 2004.
Outside of the world of GDP and labor market number crunching, tire dealers contacted by Tire Business said they're hopeful about 2005.
`''05 should be a much better year than '04,'' said Doug Swanson, co-owner of Modern Auto Care Inc. in Eden Prairie, Minn. `''04 was definitely an improvement over '03.''
His hopes are based on a better feeling in the business, especially as customers are more willing to spend money on their cars, and fleets also are loosening the purse strings.
Mr. Swanson also expects to add more workers. The dealership has employed a maximum of 20 in the past, then was around 11 for awhile. Modern Auto's since scaled back to nine, but Mr. Swanson expects to return to 11 in the first part of 2005.
Modern Auto's biggest plans for a financial windfall next year are based on the dealership's work with low-profile tires and tire pressure monitoring systems (TPMS). Mr. Swanson said many businesses don't know how to service the TPMS which soon will be required on new vehicles, giving his dealership a profitable edge.
The idea of finding growth on the inside-and not waiting for a rosy economic picture in general-isn't lost on Dick Erickson, either. The Sun Tire Inc. founder said sales for his 10 stores in Florida were up in the single digits in 2004.
``We had to fight for everything we've gotten, but we are up and thankful for it,'' he said.
His biggest change in 2004 was making some moves among his store managers. In 2005 he'll be keeping an eye on those transitions as well as monitoring the supply of imported entry-level tires. Mr. Erickson also is examining numerous locations for possible new stores in the competitive market.
``We're growing ourselves, so it isn't that (retail chains are) taking our share of the pie,'' he said. ``But we're having to be extremely assertive every day on our growth.''
Lackey Sebastian Jr., owner of Lackey's Tire and Tow in Seagoville, Texas, said he wants to open his second location-a commercial and farm outlet-within the first three months of the year. Mr. Sebastian said he's optimistic about 2005 though he saw a slowdown the last few months of 2004, which he attributes mostly to the popularity of the Texas state fair.
``In reality the state fair of Texas slows down everything in the immediate vicinity,'' he said.
On the one hand, the election and holidays are over and housing is growing, especially in the Dallas and Fort Worth areas. But on the other hand, terrorism remains an ever-present concern, he said, and many local workers had been laid off not long ago.
Still, Mr. Sebastian hopes people will be able to adapt their careers to find new jobs. ``I think it will level off,'' he said.