Inflation is down. The December jobs report is out, over 216,000 new jobs were created. The stock market has closed repeatedly at record highs at the end of 2023. So, 2024 is going to be a good year for your business and the bicycle industry in general.

I don’t know if I’d take that bet.

To be sure inflation is down. It remains above the Federal Reserve target of two percent but is hovering around three to 3.5 percent. This is a significant improvement from the rates through the previous year, 2022. However, you need to put the reduced rates in perspective.

The inflation rate hit a 40-year high in June 2022 at 9.1 percent. Throughout 2022 inflation fluctuated between 7.1 percent and 9.1 percent. Getting the inflation rate down in 2023 was the intention the Federal Reserve had while increasing interest rates and it seems to have worked. There was a collective sigh of relief that inflation had dropped, yet consumer spending remained cautious as prices remained elevated.

One thing many people overlook is that inflation is usually measured from a point in time from the prior 12 months, i.e., the inflation rate from July 2023 used prices from July 2022 for comparison. Inflation in July 2022 was 8.5 percent. Inflation in July 2023 was down considerably at 3.2 percent, but that was by comparison to prices that were already considerably higher from the previous year.

Another common misconception is that a lower inflation rate means prices are going down. In fact, a lower inflation rate means price increases continue, but at a slower rate. Certainly, some prices do go down over time on individual products, but typically those products are part of a larger bundle of commodities like food or clothing that make up a component of inflation. 

The economy has been creating jobs over the past year. The government reports that 2.7 million jobs were created in 2023, an impressive number.  But like the inflation rates mentioned above, sometimes the numbers aren’t all they seem to be. During the pandemic, millions of jobs were lost as companies closed down and had to lay off employees. Over the succeeding years as the pandemic receded, these jobs began to come back. Were jobs being created? Yes, they were. Were they jobs that were lost initially because of the pandemic? A great many were.

Also consider that a number of people represented getting these new jobs may have been laid off for months, depleting the savings they may have had. To be sure, the federal government pumped a significant amount of stimulus into the economy to mitigate as much economic damage as possible which helped a lot. Still, you may ask, did that stimulus bring forward purchasing decisions allowing people something to do? And what was the impact on 2023 sales and what might be the impact on 2024 sales?

The stock market was setting new closing highs through the last week of 2023, the Dow Jones, NASDAQ, and the S&P 500. That’s impressive and has made a lot of people feel a bit more secure. It is estimated that 58 percent of the population owns equities so they may be feeling pretty good these days. Still, what goes up also comes down.

With the reduction of inflation, the Federal Reserve has indicated they are most likely to stop raising interest rates and could start lowering them in early 2024. The possibility of interest rates coming down has played well with the stock market and may do so in the coming weeks and months too. But as you think about the coming year keep in mind that any uptick in inflation could delay a rate decrease, stopping the climb of stock prices in their tracks.

If there is another ray of optimism for 2024 it might be because it is an election year. To be sure, the current administration will do everything it can to keep the economy on an even keel, to give the impression it is applying the right economic tools with the right amount of leverage to keep things humming along. Conversely, the opposition will try to convince a majority of the population that things would be even better with them in charge. Either way, it is doubtful the economy will get worse than what people perceive it to be now.

That is a macro look at the economy. What about a more specific look at the bicycle industry? The inventory issues continue to weigh heavily on the major brands and distributors. Deeply discounted product offerings are becoming more the norm than the exception. The advertising will drive consumer behavior with expectations holding that prices may continue to fall.

There are bright spots helping but even those come with caveats. E-bikes continue to be big sellers with big price tags, but very inexpensive off-brand direct-to-consumer products are having an impact.

Several jurisdictions are beginning to pass codes relative to the handling, storage, and charging of lithium-ion batteries.

Gravel bikes are another segment that seems to be growing with good consumer demand. These bikes aren’t faced with the regulatory issues e-bikes are facing, but the same inventory issues plaguing other segments are having an impact here too.

Earlier articles I’ve written address some of these issues with suggestions on how to plan and manage the impact of these and other issues. If you haven’t seen or read them, I would recommend you go to the Human Powered Solutions website (humanpoweredsolutions.com) and check them out. If you get nothing else from this article think about this. Even if your distributor offers to hold your margin on a heavily discounted product, the actual dollars to your business will be significantly less.

Is that part of your business plan for 2024? If you plan to be in business in 2025, make sure you do the things necessary to survive 2024.

Contact Steve Bina: steve@humanpoweredsolutions.com.