Restyling & Truck Accessories - January '15

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42 Restyling & tRuck AccessoRies | January 2015 Clearing Skies, By: Phillip M. Perry Experts see improving prospects for the American economy in 2015, but many risks remain. B lue skies and cool breezes. That's the economic forecast as the calendar turns for a new year. Businesses looking to bolster revenues and profits during the next 12 months should benefit from a gradual improvement in such vital sup- ports as employment, housing and capi- tal investment by big corporate players. "Recent economic data have been encouraging," says Sophia Koropeckyj, managing director of industry econom- ics at Moody's Analytics, a research firm based in West Chester, Pa. "Stronger job growth, record low debt service burdens, record high stock values, and rebounding house prices are supporting consumer spending." While such factors would normally be expected to provide a healthy tailwind to the economy, a num- ber of issues will continue to put a drag on progress. "Weak wage growth and a considerable amount of lingering slack in the labor market are preventing even stronger spending," says Koropeckyj. She points to the high share of work- ers who would prefer to be employed full-time but who must settle for part time jobs. Greater Sales The brighter 2015 outlook shows up in the number most commonly used to assess the state of the economy: gross domestic product, or GDP. That figure represents the nation's total revenues for all goods and services. The higher the number the more likely business owners will find customers receptive to their marketing. In 2015, the nation's GDP is expected to increase at a 3.5 percent rate, according to Moody's. That's a consider- able improvement over the economy's average growth mode of 2.5 percent. "We are upbeat," says Scott Hoyt, senior director of consumer economics for Moody's. "It looks like the economy is starting to accelerate, and we expect that trend to be maintained." Business owners could be forgiven for harboring some doubts. After all, a year ago econo- mists were predicting a much brighter 2014 than what was actually experienced. Indeed, that year's 2.2 percent GDP growth rate was considerably below the 3.1 percent increased forecast by Moody's. What happened? "The year started on a weak note caused by the severe winter weather and exces- sive inventory accumulation," says Ko- ropeckyj. Those issues pulled down the results for the remainder of the year. Things weren't helped by an unexpected summer spike in interest rates, which put a damper on the recovery in the housing markets—not only in terms of direct sales but also in employment. "Fewer than anticipated construction jobs affected overall income growth in the economy," says Hoyt. Back in the Game Consumer confidence is a critical factor in a robust economy. When people buy more, that helps spur business activity in all sectors. And the public, it seems, is feeling more chipper than a year ago. "Consumer confidence has been sort of 'inching up,'" Hoyt says. "It has not risen a lot, but we are by most measures near post recession highs. As conditions continue to improve and as the unem- ployment rate comes down and we see growth in wage rates, confidence should be higher. That will facilitate the release of pent-up demand and greater spend- ing." Indeed, the jobs picture has been improving steadily. The unemployment rate had improved to a 5.9 percent level toward the end of 2014, and Moody's expects it to decline to 5.7 percent by the end of 2015. By the end of 2016 the nation should experience what econo- mists call "full employment," which is an unemployment rate of 5.5 percent. Given the improving employment picture, consumers are expected to open their wallets wider over the coming year. "Core retail sales should increase 6 percent in 2015," says Hoyt. "That's a significant increase from the 3.9 percent rate expected to be recorded when 2014 numbers are finally tallied." It also reflects a more robust retail environment than the period just prior to the 2008 financial crisis when the comparable figure was only 4.6 percent. Why the big spike? "Part of the reason is that 2014 has been stronger than the reported 3.9-percent retail growth rate suggests," says Hoyt. "The weak first quarter in 2014 artifi- cially depressed the year's results." In other words, consumers are returning to the stores and retailers are entering 2015 on a pretty good trajectory. 42 Restyling & tRuck AccessoRies | January 2015

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