The Ag Equipment Intelligence-Cleveland Research Co. (AEI-CRC) Dealer Optimism Index, a measure of sentiment among North American dealers compared to the prior month, declined to a net 9% of dealers reporting they have a less optimistic outlook now vs. a net 5% reporting more optimism last month.
This is the first time since AEI-CRC began polling dealers on a monthly basis in April 2011 that the Dealer Optimism Index has shown more dealers with a pessimistic outlook compared with the previous month than dealers who are confident about current business conditions.
Based on the responses of 166 dealers across the U.S. and Canada, 15% of the dealers responding are more optimistic about business conditions compared with the previous month, while 24% are less optimistic. Slightly over 60% of dealers reported their outlook remained the same as in the month before.
While the “Dealer Trends & Business Outlook” report represents only a “snapshot” of dealer sentiments at a specific point in time, it’s interesting to see the dealers’ comments about why they feel the way they do.
Beside some complaints about their specific equipment suppliers, dealers indicate their three main concerns right now involve the changing tax laws, the weather and crop conditions, and volatile commodity markets. Here are a few of their comments:
About the weather and crop conditions:
“I’m less optimistic now because it looks like our net profit per acre will be less than last year” … “I’m not sure if the wheat crop in our area is going to be as good as expected”
On the tax laws:
“Tax laws have me less optimistic” … “I’m less optimistic because of the tax law changes: Section 179 is going away”
About the economy:
“I’m concerned about the effect of the world economy on the ag market” … “I’m less optimistic because the European uncertainty is causing the commodity market to be fickle”
This may be purely coincidental, but just about the time dealers said their confidence about near-term business prospects was waning, the government said American manufacturing shrank in June for the first time in almost three years.
All of this seems to convey a sense of uncertainty in the economy these days. When industries, markets and individuals are in doubt, they tend to stop what they’re doing, hesitate about moving forward or they speculate. None of which is particularly healthy.
On the other hand, this data is only a “snapshot” of one point in time. Overall, dealers say they’re still expecting their business to grow an average of 3% in 2012.
This compares with an average projected growth rate of 4.1% over the past 10 months. So, overall, things are still looking pretty good.