The Real World?

This may be the information age, but the speed and quantity of information available hasn’t made concepts like economics any easier to get a handle on.

A recent economic report from the CIBC says that the economies of Canada and the U.S. can expect to continue their strong performance in 2000 after racking up growth rates of nearly 4% in 1999. The global economy, say the CIBC’s economists, is on the upswing.

This reflects a sentiment we’ve all heard endlessly–the economy is great, life is good and the booming U.S. economy is largely responsible for all our good fortune in Canada (which may be largely true)–but it is usually linked with a criticism of Canada’s tax system, which takes the blame for all the ills of our economy (which may not be true).

“A tax system that unduly restricts financial rewards and penalizes success tends to be self-defeating, since it undermines its own capacity to generate improvements in future well-being,” says Joshua Mendelsohn, CIBC’s chief economist.

“Canada, unfortunately, has fallen into this trap,” says Mendelsohn.

So, if the tax system is to blame for the fact that life seems to be getting tougher to pay for, how does this explain the next piece of information?

According to Statistics Canada numbers, compiled in a report by the Vanier Institute for the Family, family incomes have shrunk by 5.6% since 1989 and have continued to fall even as the economic indicators say things are good. In dollar terms, taxes actually fell a few dollars, though they rose as a percentage of income by about 1% from 1989 to 1997.

Logic would state that this means people would have less money to spend elsewhere. Logic, however, seems to have taken a holiday. Families are, in fact, spending more. The biggest spending increases were on recreation equipment and services, which rose 34% between 1992 and 1997; medical care and health, up 16%; and transportation and communications, up 12%. Canadian families are spending themselves into debt.

How’s about another number for your delectation: in the third quarter of 1999, Canadians’ disposable income rose 1.2% over the previous quarter and 3.4% over the 1998 numbers. That’s good, right? So, why did the savings rate go down by 1.3%? You want to bet it has something to do with the cost of living?

The reason I mention all these assorted economic figures is just to make the point that the aftermarket is moved by some very large issues that have nothing to do with the aftermarket, and yet have everything to do with its success.

From a dollars and cents standpoint, would you say the market is more prosperous or less prosperous than it was a decade ago? From a larger perspective, what would you say about today’s aftermarket versus 1990’s?

Would it surprise you to know that the total retail expenditure by Canadians for automotive parts, accessories and services is consistently higher now than it was, and by a good margin? Going back to January 1999, Canadians spent $1.25 billion on automotive stuff, excluding GST and car sales. In the heyday of 1990, that month saw $1.03 billion and that included the old Federal Sales Tax.

According to Statistics Canada, the total expenditures for 1999–I had to estimate the last quarter—were $14.8 billion, which is a familiar number if you’ve been keeping up with your AIA Outlook Studies. In 1990–again including the FST–the total was $12.3 billion. On the face of it, that’s an increase worth noting. Yet, in the field, times seem to get tougher every month.

I’m not sure what to make of economic indications that seem to be as much in conflict with individual experiences as they are with each other. Benjamin Disraeli’s comment about “lies, damned lies and statistics” comes to mind, but so does a quote from a college economics professor who was once saddled with teaching a bunch of journalism students. “The problem with economics,” he said, “is that it doesn’t apply to the real world.”

NEXT MONTH

There will be a lot on tap in March, with previews of CIAS 2000 and the AIA Convention, market features on Tune Up Parts, Chemicals and Additives, and our Spring ASE Parts Specialist Certification Exam Prep Guide, and these are only some of the highlights planned for the issue. Watch for it!