Observer: What recession?

CHICAGO — We've all heard the "R" word being tossed about. Recession. Is the country in one? Is it on the verge of one?

Well, William A. Strauss, senior economist and economic advisor in the economic research department of the Federal Reserve Bank of Chicago, says we might not be there yet because of employment, manufacturing and other rates.

"At this point, if this will be dubbed a recession or whether or not it will be a real slow, stagnant growth, it's going to feel pretty bad," says Strauss, the leadoff speaker at this year's Global Automotive Aftermarket Symposium (GAAS).

He describes recessions as being based on monthly indicators, like two back-to-back quarters of negative growth. However, since the nation recently has been looking at whether the country is in a recession, we have experienced multiple quarters of negative growth, just not consecutive ones.

"The 2001 recession was felt by the manufacturing sector not the consumer," Strauss says. "The outlook for the consumer is not all that great for this year."

And if it's not a good year for the consumer, that will run back up the channel and could translate into a lesser year for the aftermarket.

Rising gas prices are one reason consumers cite for spending less on maintaining their vehicles, but if oil prices are adjusted for inflation, prices just recently broached $100 a barrel. That number is the price hit around 1980. Right now, without gas taxes, gas prices are between $2.50 and $3 per gallon.

"We really should be looking at much higher energy prices if we're to believe the relationship (between oil prices and gasoline prices without taxes) holds true," he says. "But it's not the case, and I think it's because the softening demand is causing prices to be less able to go higher."

Gas prices are up 42 percent from a year ago, but gasoline sales are lower, and have been lower through most of this year and last year, Strauss says. "People are being more frugal with their spending and use of gasoline."

Sticking with the new vehicle market, inventories for passenger cars are in good shape, he notes, staying near the desired 55-day supply. However, light truck inventories are edging higher than they were last summer. Of these vehicles, imports comprise the highest market share, followed by new domestics (foreign nameplates producing vehicles in the United States) and the Big 3. The Big 3 have fallen to just less than 50 percent of the market share, according to Strauss' data.

"We're probably skirting a recession at this point, but I personally don't believe we're in a recession," he stresses.

— Tschanen Niederkohr