We’ve almost weathered the storm. There are hopeful signs on many fronts that the worst of the recession is over and that a recovery, if not already under way, is on the near horizon. The unemployment rate has stopped increasing and new vehicle sales seem to be consistently back above the 1.5- million
So all is well? Maybe… but maybe not. For sure, it’s no time to get complacent and revert to business as usual.
For one thing, the business environment has been fundamentally changed in the last year. Companies have gone through bankruptcy. Brands have disappeared or found new owners. Dealers have disappeared or switched brands. And consumers have become very, very cautious. They’ve also been conditioned to believe that huge incentives have become their rightful norm and they’re prepared to sit on their wallets if they can’t get the deal they think they deserve.
So the situation remains quite volatile. And it may get more so.
Although it now seems less likely, there is still the possibility of the dreaded W-shaped recovery, with a secondary recession yet to come. Unlikely as it is, one international incident could set it off in a moment.
More probable is a rapid run-up in interest rates that could not put a big damper on the favourable financing conditions now available to car buyers. As we go to press, the Bank of Canada is sending out clear signals that today’s low rates are unlikely to survive until next July as previously planned. Not good news, but perhaps preferable to the prospect of runaway inflation that may be the alternative as the recovery takes hold – especially given the enormous debt levels governments have taken on to stimulate the economy out of recession.
There’s also the little matter of the loonie, which right now is trading at about 97 cents (
All of which is to say, things are looking better than they have but there’s a long way to go yet before we can sit back and relax.
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