HEY , HARLEY – LEAVE DUCATI ALONE …
Well , just as we were hoping that the motorcycle parts and accessory market ’ s softening of the past 12 months ( in the United States especially ) might be going to stabilize or even reverse itself a tad this year , it looks like underlying economic trends and indicators are starting to blink amber , rather than the green lights we ’ d been assuming would be the case in 2017 . Many people in the industry have made much about how the primary indicators such as the growth in the number of jobs , relatively low unemployment rates and record numbers of people with jobs has not been creating fiscal “ trickle down ” to discretionary spending , and it is beginning to look increasingly like they have been right to be concerned . Throughout the recovery from the 2008 to 2012 banking crisis and the deep , deep recession it triggered , there has been concern about the quality and pay levels of the jobs being created . Leaving aside issues of whether economies should be using prior metrics as the basis for a forward looking analysis of the kind of work that needs to be made available ( it isn ’ t change that is the enemy , it is failing to change that what destroys lives , communities and economies ), the actual levels of discretionary disposable income being generated by the kind of 21st century jobs growth seen so far simply hasn ’ t yet translated into being the driver of economic activity that it should have been . On both sides of the Atlantic we are seeing levels of unsecured consumer debt climb back to alarming levels . The total consumer debt balance for the first quarter this year in the United States hit $ 12.73 trillion – that is higher than the $ 12.68 trillion recorded in the United States for the third quarter of 2008 – and we all know how that movie ended ! In June , in the UK , the Bank of England also started to caution against rising levels of unsecured consumer spending , and in the usual uber-risk averse consumer markets of continental Europe , in Germany especially ( a country where debt is regarded as being closer to mortal sin than civic duty ), consumer debt is also on the rise and will almost exceed the Eurozone ’ s June 2010 consumer debt record level within the next 12 months . While retail spending is still ( mostly ) growing , for the time being , which is a good thing , if it isn ’ t being paid for by real wage level growth , growth above the rate of inflation , then it becomes a very bad thing indeed – it becomes something being driven by people ’ s attempts to keep up with the increasing cost of living in the face of declining real world declines in incomes . With growth forecasts being marked down , that is what is starting to happen
“ beware the movie ’ s sequel ” now . The economic orthodoxy is that a modest level of inflation is a good thing , a necessary side effect of growth , and something that is easily countered by increasing interest rates . However , that orthodoxy is predicated on the assumption that the corporations who generate the jobs , the growth , the wealth and the government tax incomes needed to pay for welfare , education , health , infrastructure , defence and , yes , meeting the rising costs of public and private debt – unsecured and otherwise - are able to do so . That in turn is dependent on their ability to access affordable capital – either through the banks , the stock markets or private investment . The problems start when that flow of capital starts to come under pressure , and those problems have the habit of getting worse real fast if institutions that do the lending are exposed to excessive levels of risk ( unsecured consumer debt for example ), a slowing of growth , rising interest rates and a return of inflation . I am afraid to say that this would appear to be exactly the kind of toxic cocktail we could be headed towards again . Some 10 or 11 years ago I wrote and published a two-page Comment article headed “ We are drowning in a sea of debt ,” in which I warned against the excessive heat that had built up in the motorcycle aftermarket and the dangers arising from how it was being funded . I keep meaning to ferret around in our back issue archive to find that article , so I could place when in the timeline of disaster it was that I had called it – some time in 2007 or early 2008 I think . Now I am not saying that we are “ in that place ” again , certainly not yet . I am not saying that the laws of inevitable consequences that govern the gravity field that affects debt are an inevitable outcome of where we are right now – not yet anyway . However , debt is the enemy of performance , and what I think the present mixed signals do behove us all to do in our businesses is to remain risk averse , remain realistic , continue enjoying what we do and investing in our brands and our product lines ( the two key elements to determining downturn outcomes ), but to do so with the minimum possible exposure to risk , and that means the minimum possible levels of debt . Which brings me to the point this week – I have one simple message for Harley- Davidson and that is : DON ’ T DO IT ! As it happens , I think the rumors ( accelerated recently by business news provider
Continues on page 6 4 AMERICAN MOTORCYCLE DEALER - JULY 2017 www . AMDchampionship . com