Posts Tagged U.S. Economy
We are now in the last quarter of the year; so how has 2012 been for you so far? In the first month of this year I posted a blog titled ‘Hopes for the New Year’ and then wrote a spring and summer update to that posting. When you take a look back over the past 9 months pretty much all the hopes for 2012 I had have fallen short.
The first hope was that:
“Our industry is affected by three key business drivers: weather, the economy and miles driven. Sadly we have no control or influence over any of these so I’m hoping for some luck for 2012.”
The weather this year hasn’t been very cooperative for the automotive glass repair and replacement (AGRR) industry. We started with a snowless winter in most of the northern states and as reported by HailReporter.com we’ve experienced about 2/3 of the hail storms that we had in 2011. You know that snow, ice and hail all are big influencers to auto glass breakage and all were busts (pun intended) this year.
Early in the year many experts forecasted the economy would be anemic. Most of those forecasts were accurate. Kiplinger.com provides a variety of information on financial advice and business forecasts via its Economic Outlook section of the website which they regularly update with current outlooks. As of September 27, 2012 Kiplinger reported that:
“The stubbornly tepid economy will persist for the rest of this year and next.”
“It’s clear now that job creation will continue at a sluggish pace in the second half of 2012.”
“The U.S. is likely to add fewer jobs this year than last — about 1.6 million, compared with 1.8 million in 2011.”
“Instead of lending, banks remain wary.”
“Higher gasoline prices pushed inflation in August to an annualized rate of over 7%.”
“Business managers will remain very cautious about expansion at least into the early half of 2013.”
“Expect the recent roller coaster in oil prices to keep on going a while longer.”
“Rising prices of fuel and other goods pose a risk to the increased growth rate, even as consumers shrug off anemic job growth and continue to spend.”
Not very positive views from Kiplinger’s relating to another key influencer – the economy – to the AGRR industry.
Miles driven had been trending upward this year, but with rising gasoline prices the Department of Transportation’s Federal Highway Commission reports that as of July 2012 miles driven starting heading lower again. Earlier this year many forecasted that 2012 would not be a good year for gasoline prices and it appears that the forecasts were fairly accurate. This is the time of year when historically prices decline, but even though the price of oil has moderated; issues with a number of gasoline refineries across the country has caused prices to go higher as reported by a GasBuddy.com blog. The AGRR industry would like to see miles driven go back to the peak levels of seen in 2007 – 2008 for this key influencer.
The second hope was that someone becomes a market leader for the AGRR industry. I’m not holding my breath, but I’m still hoping for that one. My third hope was for fewer imported (non OEM) auto glass parts in 2012 so that prices might be able to stabilize. There may be fewer imports this year, but that’s only because the overall market size is down. The fourth hope was that every windshield be installed according to the Auto Glass Replacement Safety Standard – AGRSS®. It’s the right thing to do for your customers.
The fifth and final hope was that somebody would step up and compete against Safelite® at the both the retail and network level. It was a tall order considering the extremely envious dominant position that it enjoys with its strong retail and network. It’s not as though there aren’t individuals or companies at all levels of the AGRR industry with the unrelenting goal (and hope) of providing consumers with an alternative. At some point you have to believe that insurers and fleets might become wary of the tremendous influence the market leader has achieved with its dominant market position. It’s hard for me to see how Safelite® could maintain its market position or really grow its market share larger long-term. Unless they are willing to restart its acquisition program or maintain the onslaught of media advertising over the long-haul it’s going to be tough for Safelite® to move its sales upward in a meaningful way. Time is running out this year, but who knows what the New Year will bring.
Here’s hoping that in the last three months of 2012 you’re seeing positive signs pointing to improvement in your business or at the place that you’re working.
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Is your glass half empty or half full in 2012? It depends upon your point of view.
Last January I wrote a blog titled ‘Hopes for the New Year’ and in March I updated the blog with how events were influencing that blog posting. In the original blog I offered the hope that 2012:
“turns out to be a great year for those in the automotive glass repair and replacement (AGRR) industry (or if great is too high a bar to set at the very least better than 2011)”.
I’ve talked to a number of people across the country and, by virtually every measurement, the first two quarters of 2012 certainly have not been seen as very favorable to the AGRR industry, especially when compared to 2011. So far this year it has been a bust for the vast majority for most in the industry.
There are a few exceptions of course. With one of the warmest winters on record, 2012 has started out with little help from one of the three key driver’s effects the AGRR industry – weather. During the second quarter a few markets have had some favorable bad weather. If you happen to have a store(s) in markets that have had hail storms this year such as the greater Dallas metropolitan area that was battered by big storms earlier this month business has probably been GREAT. The storms in Dallas could cost insurers up to $ 2 billion in automotive body and glass damage as suggested by the Southwestern Insurance Information Service and reported by www.propertycasualty360.com. Those hail storms in Dallas, along with large storms in the greater Saint Louis, Louisville, Denver and Indianapolis metropolitan areas, as well as those in a few other marketplaces scattered across the United States have certainly provided a welcome benefit for some in the industry.
The second key driver for the AGRR industry is the economy and by most reports that’s not working to our advantage either. A number of United States economic metrics as reported by CNNMoney shows that:
- consumer confidence is at a five month low
- home prices are at the lowest level since 2002
- the annual Gross Domestic Product in the first quarter of 2012 is down versus the fourth quarter of 2011
- in May the U.S. manufacturing growth has slowed, the May jobs report shows that hiring has slowed and unemployment rose for the month
- after taking out the lowering cost of gasoline, retail sales grew by 0.1% overall in May and
- inflation was down .3% in May, but after taking out the impact of gasoline and food inflation was up .2% for the month trending at an annual rate of 2.3% year-on-year.
None of these economic metrics provide very much good news for how the rest of 2012 will fare.
Additionally, as reported by Bloomberg.com the Federal Reserve Chairman Ben S. Bernanke announced last Wednesday that if the job outlook didn’t improve in the near term that the Federal Reserve would move to further stimulate the U.S. economy and then last Thursday the U.S. Labor department announced that unemployment claims were trending up over the past four weeks versus falling during last fall and winter. The nonpartisan Congressional Budget Office reports that the United States could slide back into a recession based on economic performance. The Federal Reserve Bank of Philadelphia announced last Thursday that “manufacturing conditions, the diffusion index of current activity, fell from a reading of -5.8% in May to -16.6% (in June), its second consecutive negative reading”. None of these reports point to an overabundance of positivity looking forward for the U.S. economy.
The U.S. isn’t alone in the world as the difficulties that we face on the economic front pale to the issues faced in Europe and if they don’t resolve their problems they could ultimately affect our economy. The European powerhouse Germany reported that manufacturing output was at its lowest level in three years, certainly not a good sign for the rest of Europe and anyone in the AGRR industry that compete in the European markets (i.e. Belron). And to add to the economic woes of the world, in June China hit a seven month low in manufacturing activity as reported by HSBC Group.
One key driver – miles driven – has been showing improvement. Earlier this year the price of gasoline was predicted to hit $ 5 per gallon with the rising price of oil, but with oil prices continuing to drop due to the poor world economy the national average price of a gallon of regular gasoline on June 18, 2012 was $ 3.533 as reported by the U.S. Energy Information Administration (AAA Daily Fuel Gauge Reports shows the national average price of a gallon of regular gasoline at $ 3.411), consumers have been given welcome relieve. There was more good news for continued increases in miles driven as reported in an article titled ‘Gas prices could hit $ 3 a gallon by autumn’ that was published last Friday in USAToday. In a blog post in mid-March I included the picture below left of a sign at a service station at the corner of LaSalle and Ontario in downtown Chicago, Illinois. The picture below right was taken yesterday at the same station and as you can see the price is well above the nation average.
March 19, 2012 June 25, 2012
The U.S. Department of Transportation – Federal Highway Administration had reported that the cumulative miles driven year-on-year through March 2012 are up 1.4% or 9.7 billion more miles driven. The graph below shows how miles driven historically have grown since 1987 until the downward trend that started in early 2006.
Increased miles driven obviously turn into more opportunities for auto glass to be repaired or replaced, but only if the “do nothings” actually do something. Sadly, figures on miles driven out yesterday for April 2012 versus April 2011 point to a reversal in the trend that we had been seeing in miles driven with the month of April being down .4% year-on-year. Not a good sign.
While taking with someone in the industry recently I suggested that you could add another key driver that affects the AGRR industry besides weather, the economy and miles driven. That fourth driver would be Safelite Auto Glass. With Safelite’s capture of the second largest insurer earlier this year, the majority of the U.S. AGRR retailers found a dramatic fall-off in repair and replacement opportunities for Allstate Insurance Company insured’s.
Safelite’s continued dominance in AGRR markets across the country and its constant advertising campaigns that are seen and heard via its television and radio commercials is proof that Safelite is working hard to continue to grow market share. Many AGRR retailers have been curtailing their own sales and marketing spend because of the slowdown in repairs and replacements. You can be sure that Safelite’s non-stop advertising during this slowdown will certainly pay big dividends when economic conditions do begin improve in the future.
I left Safelite in late 1989 and my boss at the time used to talk a lot about “the pendulum swing”. He was referring to a business adage – when sales are good the sales departments of a company rules and has the most influence so the pendulum swings to their side, but if sales are bad the accountants rule and the influence of sales departments wane. I’m not sure how that adage is playing out at Safelite today with my former boss at the helm of the company, but I’m pretty sure that accountants are certainly influencing the decisions being made in many companies today and that’s not good for the people who work at those companies or for the long-term success of those companies.
How’s business where you work? Are you seeing sales improving or are sales falling behind? How are sales affecting you?
In a previous post I wrote:
“People are the ultimate key driver to any successful business. Companies that don’t recognize the incredible value that attracting and then keeping the most talented people undoubtedly will suffer when weather, the economy and miles driven have a negative impact on the business. Recognizing that employees are the key driver that helps every organization find ways to innovate, increase customer service levels and create value for all stakeholders will allow it to flourish and remain competitive in the marketplace.”
With all that’s happening and effecting in our industry today, “Be Smart in 2012” and take special care of the ultimate key driver in your business – your people……
Aftermarket glass, AGR, AGRR, agrr industry, auto glass, Auto Glass Company, auto glass industry, automotive glass, Belron, Bernanke, bloomberg, CBO, China, cnn, cnnmoney, comsumers, Congressional Budget Office, consumer, consumer confidence, Dallas, David Rohlfing, denver, economy, Europe, federal govt, Federal Reserve, GDP, glass half empty, hail, hail storms, home prices, HSBC Group, Indianapolis, Insurance Industry, just sayin', key drivers, louisville, manufacturing, miles driven, recession, safelite, safelite auto glass, safelite solutions, Saint Louis, Small business, St. Louis, state govt., tpa, U.S. Economy, unemployment claims, us government, US Govt, usa today, weather, windshield repair, windshield replacement, windshields, www.DigitalCosmonaut.com, www.usatoday.com
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