Is the U.S. economy – and the RV industry along with it — headed toward an economic downturn of some nature?
That’s a definite possibility, Richard Curtin, director of the survey of consumers at the University of Michigan’s Survey Research Center and a long-time economic forecaster for the RV Industry Association (RVIA), told members of RVIA’s Market Information Committee this week during the association’s annual “RVs Move America” proceedings at The Mayflower Hotel in Washington D.C.
“The most common question I’m asked today is, ‘when does the recession start?’” said Curtin. “Well, it’s not going to start for a while. It’s not going to start at least until the mid-to-end of 2020. I think we could see a recession, although I’m not forecasting it to start then.
“At the same time, we’re not going to have robust economic growth,” he predicted. “Growth will be sluggish, and it will be sluggish throughout this forecast period. And, you know, uncertainty is the dominant characteristic right now among consumers, firms, policymakers, wherever you look. And uncertainty never is good for the economy. When people are uncertain, they tend to postpone decision-making, waiting for more information until they become more certain.
“Now, I think that’s (uncertainty) something that we have to recognize will be here until the end of next year, probably until the end of the election next year, maybe even longer,” added Curtin, who had already dialed down his wholesale shipment forecasts prior to Committee Week following the industry’s sluggish start in the first third of the year.
Curtin’s quarterly “RV RoadSigns” publication currently projects shipments at 416,300 units for 2019, down 13.9% from 2018’s year-end total of 483,700 units, then regaining 2.4% to 426,700 units in 2020. RVIA spokesmen point out that those projected totals would still rank as the fourth and fifth highest in 40 years, trailing only the previous three-year period during which the RV arena reached an all-time high.
Adding to the current economic challenges is the likelihood that the boost the economy enjoyed over the past couple of years from the Trump administration’s fiscal policies – especially tax cuts and reduced regulations – is clearly dwindling, said Curtin, especially when taking into account the current and potential impact of tariff policies. Because of the prospect of rising prices as well as an inflation rate that’s been inching up, Curtin maintained, consumer surveys indicate that “spontaneous negative references” to tariffs have “exploded” lately.
“So, we should expect when prices go up because of tariffs people are going to more likely postpone (purchases),” said Curtin. “And the tariffs have a big impact on this industry. And so, we should expect that. Who knows if the Mexican tariffs will actually go into place and actually rise to 25%? But consumers would react very strongly in anticipation of the rise. So, what they’re waiting for now is to see if the 5% (Mexican tariff) goes into effect. That would be somewhat negative. But if the 10% goes into effect, they’ll (consumers) expect 15% and they would start reacting much stronger.”
Curtin suggested that the RV industry remind Congressional leaders of the impact that rising tariff-related costs can pose both for dealers and their buyers and he reminded Market Information Committee members that the winners in all this will likely be RV manufacturers and dealers whose products offer the best perceived value. “So, value for the dollar in your business means how much they get out of that RV lifestyle,” he concluded.
Curtin, meanwhile, sees the upcoming presidential election as a watershed moment, especially the status of those controversial tariffs. “I don’t find it strange that Trump announced the Mexican tariffs. Why? Well, he is running for re-election, and he promised just a few things the last time: reduce regulations, tax cuts, immigration, and trade. And he wants a few more that he can walk up and say, ‘Look, I’ve accomplished this.’ And so now he creates this Mexican tariff. And you know, as an economist, tariffs are terrible. They reduce everyone’s well-being, and there’s nothing good about them.”