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RV Upturn Foreshadows Consumer Confidence Rise

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September 29, 2009 by   Leave a Comment

A closely watched report today (Sept. 29)  on consumer confidence is expected to show modest improvement, but some economists are heartened by a more obscure measure of buyer sentiment: recreational vehicle sales.

RV wholesale shipments jumped 16% in August from July to a seasonally adjusted annual rate of 209,800, the Recreation Vehicle Industry Association (RVIA) reported.

While that’s about half the industry’s torrid sales pace in 2006, it’s a 136% surge from January. The trade group predicts 146,200 shipments in 2009 and a 27% increase in 2010, according to USA Today.

Sales of motorhomes and travel trailers are seen by some economists as a leading indicator of the economy’s health, because they’re among the largest discretionary purchases a consumer can make.

Trailers cost about $6,000 to $60,000, while motorhomes — which include a living space within a vehicle — typically fetch $50,000 to $300,000. About 8% of U.S. households, mostly families and retirees, own an RV.

RV sales began dipping in early 2007, many months before overall retail sales declined and the recession’s start in December of that year. In recoveries, RV sales often heat up early, as buyers who put off purchases grow optimistic enough to open their wallets.

“Prospects that we talked to a year ago, even in spring of 2008, are now beginning to come out and buy,” said Scott Hayden, president of Driftwood RV, the largest RV retailer in New Jersey.

After plunging by a third in 2008 and early this year, Driftwood sales in September are 15% ahead of a year ago and up 4% vs. September 2007.

Industry officials attribute the rebound to improved credit for dealers and consumers, low dealer inventories and stable fuel prices. The big driver is rising buyer sentiment, which could augur more robust retail sales than predicted.

“It would suggest the worst of the (stock market) decline seems to be over, and the consumer is in a position to come back,” said Indiana economist Morton Marcus, who studies the RV market.

Manufacturer Airstream Inc. has boosted production 30% the past six weeks. Keystone RV Co. is hiring 200 workers to fill added demand.

Some economists put less premium on RV sales. Wells Fargo’s Mark Vitner says buyers are likely retirees who deferred purchases, a trend that won’t extend to other big-ticket items, such as cars.

Economists’ consensus forecast for the September consumer confidence report today indicates that the Conference Board’s index rose this month to the highest level in a year but is still well below normal.

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