Tightened credit conditions will contribute to a 24.5% decline in RV shipments this year according to a revised report by economist Richard Curtin, director of Consumer Surveys at the University of Michigan.
Curtin projected deliveries to total 266,800 units in 2008, down sharply from 353,400 last year and a deeper decline than his June forecast of 303,700 units presented during RVIA Committee Week.
He also scaled back on expected 2009 shipments, projecting a 4.5% drop to 254,700 units versus 303,100. “Gains after mid-year will not be sufficient to offset the lows at the start of 2009,” Curtin said in the Fall 2008 issue of Roadsigns, a quarterly report published by the RVIA.
He sees a variety of factors continuing to pressure the industry, noting: “The anticipated declines in RV shipments reflect high food and fuel prices, falling employment, smaller wage gains, and continued declines in household wealth and home prices.”
Curtin, however, pointed to the changing lending environment as a key contributor to lower performance.
“RV shipments have been a leading economic indicator, first to expand in recoveries and first to contract in recessions,” Curtin said. “This ability to foreshadow economic cycles was mainly due to the industry’s sensitivity to interest rate trends. This relationship was due to the fact that changes in market interest rates were quickly and fully reflected in RV credit conditions.”
Curtin contended that the fallout in the financial sector had altered that landscape. “Banks have not only raised interest rates on RV loans, but have increased credit standards and the size of the required down payments,” he said. “Not only have banks already tightened credit conditions more than any time in the past few decades, but banks now intend to further tighten credit conditions later in 2008 and 2009.”
He did expect that the credit limitations “will diminish over time,” as RVers are generally “good credit risks.”
Looking toward 2009, Curtin said the recovery would be led by gains in the travel trailer and fifth-wheel markets “with only small gains anticipated for motorhomes.”
“This will mean the share of total shipments accounted for by conventional and fifth-wheel trailers will reach a new peak of 78%, up from 53% ten years ago,” he said.