LAS VEGAS, Nev. – At the Heavy Duty Aftermarket Dialogue (HDAD) held in Las Vegas this week, predictions from 2014 were addressed and a new forecast was outlined.
Leading the session titled, The Fundamental Drivers of the Industry, was Dr. Bob Dieli, president and founder of RDLB, Inc. He is one of the industry’s leading forecasters, who is more often than not bang-on in his predictions.
First, Dieli outlined the conclusions from last year’s forecast presentation at HDAD, which included:
The expansion phase was likely to continue through 2014;
That there would be no major changes to fiscal and monetary policy; and
There would be further adjustment (some of it painful) to structural changes.
Dieli explained that reviewing forecasts “is 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.”
He explained that the forecast in regards to the expansion phase was confirmed by the data they analyzed (through truckable economic activity) and received from the commerce department.
He added 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 a medical analogy.
“The 2001 recession was the equivalent of spraining your ankle,” he said. “This 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 you’ve been wondering why this recovery and expansion feels so much different than others it’s because we have been facing some extremely serious problems.”
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.
“We ran it up to an unsustainable level, then we broke it and it has stayed broken,” he said.
The housing market has not only affected the economy, but the trucking industry as well.
“When you build a house, you create the demand for trucks to get the stuff to get the house built,” he said. “When it’s 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.”
The stroke in his analogy represents the catastrophic collapse in employment, especially the loss of full-time jobs in the United States.
“We dropped close to 12 million jobs we completely changed the nature of the labour market,” said Dieli. “This problem is large…and we have a lot of work to do.”
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 it’s 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.
“Many of these problems I’ve just outlined are not being addressed in any serious forums,” he said. “Having our parents bicker…doesn’t really help.”
Though Dieli stressed that forecasting is a hard job to do because so many people don’t want to hear bad news (he forecasted the last recession in detail and didn’t sell any more subscriptions, even though he was 100% correct) his outlook for 2015 is positive.
“This recovery and expansion is now at 67 months – it is soon to become the fourth longest,” he said.
His predictions for 2015 were:
The expansion phase will continue through 2015;
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
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 year’s HDAD event.
Bill Strauss, senior economist at the Federal Reserve Bank of Chicago added information about the rest of the world’s economic struggles to the presentation.
“Russia,” he said, “they 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. China’s growth continues to show. India is the only one of those bricks that is showing some better performance.”
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.
“Pretty decent years, all in all,” said Strauss.
Sonia Straface is the associate editor of Truck News and Truck West magazines. She graduated from Ryerson University's journalism program in 2013 and enjoys writing about health and wellness and HR issues surrounding the transportation industry. Follow her on Twitter: @SoniaStraface. All posts by Sonia Straface