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RV industry sees shipments down by 11.4% in recent months
September 17, 2018
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It was a foggy morning in Elkhart, but that didn’t stop Douglas Luckey and his wife from showing up at Total Value RV (Recreational Vehicle) early Friday morning to shop for a 28- to 30-foot towable trailer.

The couple from Cadillac, Michigan, were out in the expansive lot with salesman Brett Yoder when more customers came into the office looking for a salesperson to help guide them through the buying process.

It was business as usual at Total Value RV despite some worries that we might be seeing the very earliest signs of a recession.

That story line gained some traction last week when the New York Times published an article highlighting some of the anxiety that is being felt in Elkhart that the good times - following the brutality of the Great Recession - could soon be coming to an end.

“As Elkhart, Ind., Goes, So Goes the Nation, and Elkhart Is Nervous,” the headline read.

Shipments of all RVs were down 11.4 per cent in June compared to the same month in 2017, according to the RV Industry Association, and some companies have cut down on the number of shifts in order to get supply more in line with demand.

Additional concerns have been caused by aluminium and steel tariffs that have translated into somewhat higher prices - perhaps $2,500 to $3,000, according to one estimate - for models utilising a lot of those materials.

If additional tariffs are imposed on goods coming from China and other countries, the effect on RV sales could be even more chilling as higher prices for those goods likely would be passed on to consumers through higher sticker prices.

With tens of thousands of local jobs dependent on the RV industry, its health is obviously important to the region, but it also gets the attention of economists and others across the country who are in the business of looking for leading-edge indicators of what’s to come.

That’s because the purchase of an RV is considered luxury or discretionary spending, which is usually the first thing consumers put off if they’re feeling even slightly nervous about the economy, said Michael Hicks, an economist at Ball State University.

“Economists aren’t as good at predicting downturns,” he said. “So we start looking for signs like RV and boat sales or spending on vacations.”

Beyond the June decline in RV shipments, there are other caution signs blinking that the economy could be headed to slower growth or perhaps even a recession − which is defined as two consecutive quarters with negative growth.

Among other issues, home prices have softened a bit, and the impact of expanding tariffs could dampen holiday spending if prices for items from China and other countries are boosted to make up for the tax, Hicks said.

Since we’re already approaching one of the longest periods of economic growth in modern times, there also is a bit of psychology in play when people wonder if we’re due for a recession, said Hicks, adding that enough people postponing a purchase can cause a negative ripple in the economy.

Though RV industry leaders are aware of the threats from inflation, higher interest rates, tariffs and more, they don’t believe there is enough evidence to say a real downturn is in the immediate future.

To the contrary, RV shipments increased by 10.9 per cent in July compared to the same month last year, and the RV Industry Association predicted at the end of August that annual shipments from factories could reach 505,900 units, making 2018 the best year ever for the industry and ninth consecutive year of growth.

Some of the slowdown in June shipments was the result of heavy orders placed by dealers at the end of last year and the beginning of this year that had to be cleared off lots across the country, according to industry insiders.

But dealers are also expected to be more cautious moving forward, and there is a natural slowdown that comes in the second half of the year as consumers turn their attention to the holidays instead of vacations.

Phil Ingrassia, president of the RV Dealers Association, said sales of motorhomes are up 0.3 per cent through the first seven months of the year compared to last year and towable sales are up nearly 6.9 per cent. “Obviously, people are concerned with some of the tariff talk,” he said. “But retail sales have held up for the first seven months of the year.”

Since the Great Recession, the industry has shifted much of its production to light-weight units that are more affordable and can be towed by the popular crossovers and SUVs that are preferred by motorists these days. Prior to the Great Recession, motorized units had a larger share of all RV sales.

The shift to lighter-weight units is the result of studies indicating younger buyers have a lot of interest in the RV lifestyle but can’t afford the most expensive motorized units, said Ingrassia and other RV industry officials.

“Millennials and boomers and those in between are into RVs,” said Kevin Broom, a spokesman for the RV Industry Association. “The enduring appeal of the RV lifestyle spans all generations now.”

That bodes well for the long-term growth of the industry, which was hammered by the credit crunch that followed the last recession.

Though there are some caution signs, Broom and others feel it’s premature to forecast a recession, even if everyone acknowledges it has to happen eventually.

In the meantime, some industry officials welcome a respite in the breakneck pace that factories have been operating under for the past several years and the difficulty of finding workers in the Elkhart area, where unemployment was 2.6 per cent in July, according the Bureau of Labor Statistics.

“We’ve had difficulty keeping up with demand for two or three years now,” said Dave Schutz, an executive at Dometic, which produces appliances and parts for the RV, marine and other industries. “Nothing is falling off the cliff.”

“We’re just back down to manageable,” he said. “We were running Saturdays and even some Sundays.”

If there is a pause or even a slight decline in the growth of RVs, industry leaders need to figure out how to sustain the growth of the industry as it has already been stretched, producing 500,000 units a year, Schutz said.

The long-term future of the industry has been affirmed in the shipments, continuing sales, attendance at RV shows and studies that indicate campers are increasingly turning to RVs of all sizes.

It can also be seen in the visitors to Total Value’s website, which was up about 24 per cent last week compared to the same period last year and continues to expand, said Jeff Lemmon, sales and marketing manager at the business.

Total Value survived the Great Recession and is now the top motorized RV dealer in Indiana and number 14 in the nation.

Though no one wants to suggest a slowdown might be in sight, owner Hank Schrock said he is being a little more careful about what he orders and the inventory he maintains on his massive lot, which includes a $700,000 motorhome.

It’s also nice to know that the long-term trend favours the RV lifestyle across all age groups and demographics.

Tribune News Service

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