SURPRISES GALORE

HOW DO YOU PREDICT A YEAR LIKE 2023?

By now, forecasters have come to terms with the fact that nobody could have foreseen 2020. The pandemic disrupted every reliable statistic, leaving experts with nothing more than economic fairy dust to bring make sense out of policy and bring the year into control.

But, going into our current year, we have all the indicative data to assess outcomes. Persistent inflation, rising interest rates, manufacturing backlog, slowing GDP — flashing signs all around. Easy peasy right? Not so fast.

In reality, there is little agreement on anything except for the fact that we may be heading into a recession. We can’t even tell at this point if the contraction will be mild or severe.

In a recent CBC article, BMO’s chief economist Douglas Porter summed up this predictive dilemma for the current year, calling 2023 “a very odd cycle.” The same article acknowledged that “the economy is awash in contradiction and the data are quite noisy.”

Automotive indicators from last year provide a perfect example of these inconsistencies. New car sales volume was down in 2022. DesRosiers Automotive Consultants estimates there were 1.49 million cars sold in 2022 — a decline of about 9 per cent from 2021, and the lowest numbers since 2009. But dealer revenue and profits were up, driven by higher margins per car and part sales. Some automakers even reported record incomes in some quarters.

Aftermarket part sales fared even better. Monthly yearover-year revenue results (released by Statistics Canada, up to October 2022; annual results not available as of writing) from Canadian automotive parts, tires and accessories stores show consistent double-digit growth between 2021 and 2022. Yes, part prices went up dramatically in 2022 on the back of inflation but the YoY increases were significantly higher — indicating either more volume or profit.

Will these opposing trends continue into 2023? Will the Canadian automotive industry — specifically the aftermarket