Dire Financial Predictions Are Not Made Lightly

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Don Brown numbers financial outlook

Editor's note: The decline in economic conditions are affecting the powersports industry, as they are affecting most other industries. Our less-than-optimistic forecasts for this year may be partially the result of the manufacturers' depletion of stock at the end of 2008, then their not being able to have the right models for sales early this year. The rapid decline in sales has made it difficult to predict future sales accurately. Our forecasts are made with the best of efforts and techniques, but given these economic pressures, we advise that the greatest care be taken in evaluating these forecasts for planning. Stay tuned! — DJB

Contemplating our industry's state of affairs while the nation is in the midst of battling a combination of terrorism and a serious economic recession taxes one's credulity, to put it mildly. Yet that's the prevailing situation.

When the terrible events of September 11 occurred, the industry was on the verge of recording its 10th straight calendar year in which overall retail unit sales had increased. Will industry sales next year be adversely affected by the continuation of the recession? Maybe other relevant questions are: Will the current stages of this recession further develop? If so, industry sales will certainly continue to suffer.

When doing research for this article, I was impressed by similarities between today's recession and the one in 2001, though obviously the previous recession was not nearly as bad. Now we are carrying an average annual deficit of more than $1 trillion, the largest deficit ever. This will put serious pressure on the dollar. The only result then will be a serious increase in inflation and a loss in the value of the dollar, both of which will force the Fed to increase interest rates — a lot! Remember the Reagan years around 1982?

But enough of the past. The next issue of this magazine will contain an analysis of the prospects for next year and beyond. Reading the dire predictions contained within these tables, I think right now it would be wise to talk about how to understand what the measurement of our forecasts really mean.

If we look at a table that has a forecast total of as much as negative 43 percent, what that is saying is based on when our analysis of industry trends was made. We are saying that unless those elements that affect industry trends change, the likelihood will be that our forecast will be reasonably close.

We are constantly working to refine the methodologies applied so that the numbers at year-end will be fairly close to those you are reading today. Sure, it's nearly impossible to know what will occur from this point until year-end. But in the meantime, we do know that sales generally follow a particular trend throughout the year. For instance, streetbikes generally run up in sales during April through June to about 70 percent of total sales for the year. Other bikes such as dual-sports have a different pattern for sales. We rely on these patterns, which are much more reliable than guessing.

When sales are depressed like they are, I rely heavily on these patterns to help maintain a general reliability. The same principles are applied to the by-state tables you can see on pages 28 and 30.

That's it for this month's column — let's all push for an improvement in the economy. Meanwhile I am watching for a change in those indices I watch during horrible periods like this. Dial in next issue. Hopefully by then the economy will have turned strongly for the better! — DJB

Note: Due to changes being made to the forecast model, these numbers are identical to last month's.

INTERPRETING THIS INDEX

Index is based on the author's analysis of the MIC Retail Sales Report, SEC filings of quarterly and annual reports, and other information provided by publicly traded companies (such as Harley-Davidson and Polaris). Readers are cautioned that these estimates are subject to error, which can result from changes in seasonal patterns due to unexpected weather conditions and fluctuations in the economy. Interruptions in the supply of popular models can also affect these forecasts. Forecasts are not intended for investment purposes. Questions concerning this index should be addressed to the author, c/o Dealernews, or the author via e-mail at djb-llc@cox.net. Composite Index Advisory Board: Lindsay Brooke, Motorcycle Historian and Analyst • Tom Hicks, Owner/President, Southern California Motorcycles • Paul R. Puma, GE Commercial Finance • Craig Southey, COO of Cycle Barn MotorSports Group

* The DJB Index is the square root of the total of our sales forecasts for motorcycles, ATVs and scooters. This index allows readers to look at (and keep track of easily) one number that is a summary of our predictions.