ITEC speaker: Economy, including tires, in recovery mode

AKRON—Bill Wood decided to get the suspense out of the way early on in his talk about the economy—with a caveat.

"My outlook for the U.S. economy moving forward for the next four to six quarters is for a continuation of a mostly V-shaped recovery. That's right, a V-shaped recovery," the economist said during a presentation during the International Tire Exhibition & Conference.

Held virtually this year and sponsored by Rubber & Plastics News, Wood's ITEC talk provided some big picture perspective as well as some specific insights about the tire business.

"It's about the idea of probability. None of this stuff is guaranteed," said the founder of Mountaintop Economics & Research Inc. of Greenfield, Mass.

"As far as the U.S. economy is concerned, I think we'll be back up to full recovery in mostly every sector by the end of next year. Some sectors are already fully recovered and experiencing growth," Wood said. "Some sectors are dramatically behind and still lagging. So the overall aggregate demand, if we measure it that way, dropped about 35 percent in the second quarter. In the third quarter, it looks like it's going to be up 15 to 20 percent. So we're not going to get it all back in the third quarter. We're not going to get it all back in the fourth quarter.

"Consumer spending will still be down 4 to 6 percent, say 5 percent for this year. But then as 2021 unfolds, things will get back to where they were on a broad base," he said.

Wood said there are a handful of trends that are impacting how the economy recovers these days.

The first is obvious.

COVID-19 and how the pandemic continues to play out will be a factor in how the economy performs. The potential for another round of stimulus money from the federal government also will have an impact, he said.

During his presentation, Wood said he believes there will be another stimulus, and a substantial one at that.

"First of all, I don't think they are going to let us have an election without having a stimulus package," he said. "Second, it's going to be tied to this concept of inequality.

"Lower income households, minority households, the statistics show these were very hard hit by the recent downturn. So there is going to be a strong impetus on members of Congress to get something done before the election," he said.

Diminished trade and de-globalization also will continue to make its mark on the economy, Wood said.

Total online sales have been up substantially as fewer people travel out of their homes to shop due to fears about the virus. That trend, which includes automobile parts, accessory and tire sales, will continue.

Retail sales, meanwhile, have recovered and are no longer in a recession, he said. Those retail sales are now higher per month than they were during the same period a year ago before COVID-19, Wood said. Tire sales rebounded over the summer as the economy reopened, including a 10-percent jump in July compared to 2019.

Traditional locations to purchase tires are doing well, Wood said. "And my forecast is that that will continue," he said, and moderate over time.

Growth will not be at that 10-percent rate when factoring in a full year of data. "But it will get back up to normal rates of growth in the coming year," he said.

While there certainly was some pent-up demand for replacement tires as many more people stayed home during the early months of the pandemic, people also are driving fewer miles.

With many schools and employers continuing their work-from-home approach, people are not putting as many miles on their vehicles for those trips. On the positive side, vacation travel by automobile has been up this year and delivery vehicles are driving more miles.

This overall trend of less driving will impact tire sales, but Wood said he does not believe sales will be impacted severely.

Working as an economist during COVID-19, Wood said, has been a bit of a humbling experience and has caused him to approach his job differently after decades in the business.

"I am far from certain about any of this," he said. "I have a new motto: 'Less certainty, more inquiry.' "