At a convention in Las Vegas, the Heavy Duty Aftermarket Dialogue (HDAD) discussed the 2014 predictions and offered new predictions for 2015.
The Fundamental Drivers of the Industry, was Dr. Bob Dieli, president and founder of RDLB, Inc. lead a session titled, The Fundamental Drivers of the Industry. He is one of the industryโs leading forecasters, who is more often than not bang-on in his predictions.
First, Dieli outlined the conclusions from last yearโs forecast presentation at HDAD, that had included:
1. The expansion phase was likely to continue through 2014;
2. That there would be no major changes to fiscal and monetary policy; and
3. There would be further adjustment (some of it painful) to structural changes.
Dieli explained that reviewing forecasts โis as important as the forecasts themselves and finding out whether you were right or wrong and why you were right or wrong is every bit as important as making the forecast to begin with.โ
He explained that the forecast in regards to the expansion phase was confirmed by the data they analyzed and received from the commerce department, adding that the forecast of no major fiscal and monetary policy was predicted because of the changing of the guard at the Federal Reserve.
To explain his prediction about structural changes, Dieli used medical analogies.
โThe 2001 recession was the equivalent of spraining your ankle,โ he said. โThis time, we had far more serious problems. First, we had a heart attack, then we had a stroke, then we developed a blood clot, and then our parents got divorced. So if youโve been wondering why this recovery and expansion feels so much different than others itโs because we have been facing some extremely serious problems.โ
He explained that the heart attack aspect was the hit on the housing sector. Dieli said this was a group effort brought on by borrowers, lenders, regulators, investment banks and the like.
โWe ran it up to an unsustainable level, then we broke it and it has stayed broken,โ he said.
The housing market has not only affected the economy, but the trucking industry as well.
โWhen you build a house, you create the demand for trucks to get the stuff to get the house built,โ he said. โWhen itโs done, you have to furnish it. We have removed what has traditionally been a major source of recovery from the process and we are likely to keep it on the sidelines for some time.โ
The stroke in his analogy represents the catastrophic collapse in employment, especially the loss of full-time jobs in the United States.
โWe dropped close to 12 million jobs we completely changed the nature of the labour market,โ said Dieli. โThis problem is largeโฆand we have a lot of work to do.โ
The blood clot is representative of the unprecedented rise in part-time employment (people who work 35 hours a week or less) because their hours have been cut or itโs all they can find in their labour market. Dieli said this has never happened before and that it not only change the dynamic in wages, but the dynamic of employment itself.
Divorce is the lack of communication between politicians and those in economic power and the fact that fixing the economy is not on their radar and is not taken seriously.
โMany of these problems Iโve just outlined are not being addressed in any serious forums,โ he said. โHaving our parents bickerโฆdoesnโt really help.โ
Though Dieli stressed that forecasting is a hard job to do because so many people donโt want to hear bad news (he forecasted the last recession in detail and didnโt sell any more subscriptions, even though he was 100% correct) his outlook for 2015 is positive.
โThis recovery and expansion is now at 67 months โ it is soon to become the fourth longest,โ he said.
His predictions for 2015 were:
1. The expansion phase will continue through 2015;
2. Major changes in the fiscal and monetary policy are possible this year because of the senate realignment and the announcement by the Federal Reserve of a change in operating procedures; and
3. Events overseas will continue to have a major influence on both the course of aggregate economic growth and the decisions by the Federal Reserve. Primarily because what is going on in Europe and Russia.
They will most likely be revisited at next yearโs HDAD event.
Bill Strauss, senior economist at the Federal Reserve Bank of Chicago added information about the rest of the worldโs economic struggles to the presentation.
โRussia,โ he said, โthey are expecting to see declines this year, with weak growth next year, so they are in a recession. Brazil is showing basically no growth over the next two years after showing no growth last year. Chinaโs growth continues to show. India is the only one of those bricks that is showing some better performance.โ
He added that the expectation are that Europe is going to be growing by 1% this year, and the US is looking at a 3% growth this year and staying around that level for 2016.
โPretty decent years, all in all,โ said Strauss.
