Last year, Bob Dieli at RDLB, Inc. indicated that the likelihood of a recession in 2016 was very low and indeed that was true. According to the Bureau of Economic Analysis, real GDP increased by 1.6 percent in 2016. Bob continues to say the likelihood of a recession in 2017 is low. His conclusions so far are:
- The economy will continue to grow over the course of 2017 and the trucking economy is expected to get off to a strong start in 2017.
- Similar to last year, we are still in the expansion phase of the business cycle, but getting closer this year to the boom phase. Employment volatility, fiscal policy uncertainty, the Federal Reserve raising the Fed Funds Rate and tighter bank regulations are factors that can push the economy into the boom phase.
The current expansion is the third longest on the list of the expansion periods on record.
2016 Q4 TEA Report Summary
Thanks to the current buoyant mood, TEA® looks to get off to a strong start in 2017.
Consumption is expected to continue to lead TEA® growth. Energy and manufacturing sectors headwinds are diminishing and residential construction is expected to continue to aid growth.
Global economy should improve.
Import growth should grow in 2017. Little change is expected from government...could be more volatile in the future.
MacKay & Company DataMac® clients are invited to our Spring DataMac® Truck Webinar on Tuesday April 4th at 2pm Central Time. We look forward to sharing the latest on the Economy, the Aftermarket and the latest happenings at MacKay & Company.
E-Commerce Parts Purchasing Study
It is important for industry players to understand the impact of e-commerce on the aftermarket and the business opportunity that it represents.
We are preparing to launch our e-commerce study this spring.
The main objective of this study is to more clearly understand the current and future e-commerce parts purchasing channels and the buyer utilizing these channels. By examining fleets’ purchasing patterns, we will examine specific parts being purchased and the channels utilized when making these purchases.
In addition, this study will:
- Profile the online buyer.
- Identify those types of parts most frequently purchased online.
- Examine the variety of channels offering online ordering and the fleets’ rationale for using the online parts source.
- Define online parts purchasing from the fleets’ perspective.
- Determine impacts to the current distribution channels.
- Identify unique and/or different distribution channels that have not been traditionally utilized.
Want more details? Have questions on the Study timing? Contact us. We would be happy to further discuss this timely and important Study. Email firstname.lastname@example.org and View E-Commerce Study Prospectus.
President Trump's policy 'to-do' list
With the installation of every new administration, thoughts immediately turn to what they might do and when they might do it.
From what we have seen so far, it appears that the transition team came to Washington with more of a “to-do” list than a policy agenda. And so, the first question has become what parts of that list are going to be dealt with through legislation, what parts will be dealt with through regulatory reform and what parts will be dealt with through executive order. Each of those choices will affect what gets done first and when the effects of the changes will be felt.
As recent events have shown, executive orders are the quickest way to get a policy in place. Regulatory change, once the necessary appointments have been made in the Executive branch, should also follow swiftly. Anything requiring legislative action is going to take a lot more time.
Case in point, back in 1981, when President Ronald Reagan succeeded in enacting the first part of his program on tax reform, that process took almost a full year to complete. Reagan took office in January of 1981. The Economic Recovery and Tax Act was introduced in Congress in July of that year. The law was signed by President Reagan in August and the new tax code was put in place in October. The full effects of the changes began to be seen early in 1982.
So far, three main policy initiatives have been discussed. Topping the list is tax reform. This will require extensive legislative action, especially since both the administration and the congressional leadership are considering changes to both the personal and the corporate tax codes. Next on the list is infrastructure spending. This can be undertaken in part through existing appropriations, but anything of a more significant nature is going to require legislative action. The last major item is the border adjustment tax, which is being proposed as a means to addressing unbalanced trade flows.
The current political calculus has the first two items under the close control of the congressional leadership. House Speaker Paul Ryan has been floating tax reform ideas for several years and is likely to insist that his versions of the proposed tax laws be considered first. Since it is rare for any tax legislation to pass as first drafted, we can expect some give and take on both the content and the sponsorship of the final bills.
Infrastructure spending has also been a topic long under consideration in Washington. But, beyond a general agreement that there should be more infrastructure spending, there is no consensus on what kind of spending should be done first and how it should be paid for. With the confirmation of Mick Mulvaney, a deficit hawk, to be the Director of the Office of Management and Budget, it is likely that all spending proposals will receive extreme vetting before being submitted.
The border adjustment tax is currently being pushed as a separate initiative by the administration. It could, however, get folded into the larger tax bills that are expected to be considered. So far, most of the press on this issue has been negative, with firms that import a lot of goods being most vocal in their opposition.
Bottom line: It is going to take a while to turn promises into priorities. Once set, those priorities are going to be debated, perhaps at length. Once enacted, it will take some time for the changes to have a visible effect.
By Dr. Robert F. Dieli, In-House Economist
Column printed in Truck Parts & Service, March 2017.