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Experts Look to RV Industry as Economic Indicator

September 30, 2009 by · Leave a Comment 

Editor’s note: The following is a transcript of a recent ‘Marketplace” radio story on distributed by American Public Media.

KAI RYSSDAL: Every day we rely on a mixture of statistics, indexes and projections to tell us whether the economy is up or whether it’s down. If things are getting better, or maybe not. Today, in the maybe-not category, we have a group known as the Conference Board. It reported consumer confidence dropped unexpectedly this month.

As we like to do though, we have been looking at a different indicator. And it says maybe things are looking up. Joel Rose explains.

JOEL ROSE: At Neil’s Motor Homes in Los Angeles, sales aren’t what they were two years ago. But manager Jim Royal says some of his loyal customers are starting to come back.

JIM ROYAL: This is their luxury. This is their luxurious toy. They maybe were taken aback at first by the economy, but now they feel, this is what we do. We’re gonna go ahead and enjoy our life.

An RV is no small investment in personal happiness. Recreational vehicles start at around $50,000. Mac Bryan is vice president of the Recreation Vehicle Industry Association. He says RVs are among the biggest discretionary purchases consumers can make, which is why they’re often an early indicator of the economy’s health.

MAC BRYAN: When you look at traditional leading economic indicators such as housing starts, money supply, that’s about where you find the recreation vehicle sales begin to turn. And that’s both going into and out of recession.

Bryan says RV sales started to decline dramatically in May of 2008, long before the economy really began to flounder. And they started recovering months ago. Shipments to retailers were up 16% in August compared with July. Indiana economist Morton Marcus says that means RV dealers and buyers are finding it easier to get credit.

MORTON MARCUS: What it probably means is that banks are finally lending money to RV dealers so that they can reestablish their inventories.

But Marcus thinks it’s too early to make any big projections about fall sales.

I’m Joel Rose, for Marketplace.

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RV Upturn Foreshadows Consumer Confidence Rise

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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