In this installment of “The Pulse,” TLG Research looks at the economic trends influencing second quarter 2014 pricing changes for various parts and service categories. Below are TLG’s thoughts on the matter, including a look at recent decisions by the Fed and when we will see inflation make a comeback.
Price increases continue at a moderate pace. A bit stronger for independent repair shops that are dealing with higher costs, primarily due to health insurance and wage costs, due to continuing shortage of good techs.
Looking at recent decisions by the Fed and reports by economists relative to a flat expected GDP from here until 2019 (CBO), one wonders when inflation makes a comeback. We are sitting on a lot of debt with interest policies that have been held artificially low by printing dollars.
At some point this will end, much as it did in the late 1970s into the early 1980s, when interest rates and inflation soared.
Many economists indicate that the longer we artificially control an economy, the bigger the fall at the end.
Offsetting the tailwind for runaway inflation is the fact that the consumer is still quite constrained, new car sales trends not withstanding. Again, from the CBO, they expect unemployment to remain near 8 percent for the balance of this year at least. Given that the consumer is responsible for two-thirds of all spending, the high unemployment will have an impact. The best predictions seem to be for a pretty lackluster 2014 in all respects economic. As noted, this may constrain inflation. Though, as an aside, as of this writing, it appears that raw material costs are on the rise again after a bit of a slow period the past year or so. This will push systemic price increases at some point.
METHODOLOGY:
PARTS CATEGORY
1. Based on reported pricing of parts to service repair centers
2. Represents change of current quarter over the prior quarter
SERVICE CATEGORY
1. Represents total job repair order price to prior quarter
NOTES TO PRICING CALCULATIONS:
The pricing is based on changes in the current quarter relative to the prior quarter. The data is collected from service repair centers with additional service repair center level pricing information provided by a number of sources. The “Parts Categories” includes only the parts. The “Service Categories” include both parts and labor and is based on the average reported. Pricing is collected in percent change, and is averaged across the U.S. Where needed the data is weighted in order to represent the entire market.
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