A very murky crystal ball

A Very Murky Crystal Ball

January is generally a time to take stock and review the year ahead; to try and foresee what factors may affect our businesses, either positively, or negatively. We assess risk, i.e. what is the probability of an event occurring and what is the consequence if it does.

As Residual Value (RV) forecasters we go through the same process but our horizon is further out and we look at the factors influencing both sides of the market equation, supply and demand.

Supply:
­ Will last year’s sales boom continue?
­ Will impending deflation/stagflation in Europe tempt OEMs to push even more cars into the UK?
­ Will the economic climate prevent OEMs from increasing prices or, at least, reduce their size?

Demand:
­ Will wages start to rise faster than prices?
­ The time when interest rates have to rise continues to move out. When will they have to rise and how quickly?
­ Will the new Greek government pursue policies that will destabilise the Euro/EU? What effect will that have on the UK?
­ How much further will the price of oil fall? How long will it stay low? With BP cutting jobs in the North Sea and a possible fall in production, will a new government have to take action to counteract falling tax revenues? Will the new Saudi regime continue the same policy of maintaining production as the old one?
­ How does all this effect the ‘fracking’ debate?

With a very high degree of political and economic uncertainty and, with many very unpredictable interdependencies, the Law of Unintended Consequences may come into play. From a risk perspective, caution may be preferable to bravery.

Written by Tim Lewis

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