RV suppliers and manufacturers have described the industry downturn that first reared its head last June and has been picking up steam since using words such as rebalancing, equilibrium, and recalibration.
As reported by the South Bend Tribune, except for an uptick last July, the slide has been consistent over the past year, sounding alarms of a potential looming recession.
It’s an important question in Indiana’s Elkhart County because its factories produce the majority of the nation’s RVs and employ tens of thousands of people in the region.
“If this is a rebalancing, I don’t know what a recession is,” said Michael Hicks, an economist at Ball State University. “This (RV shipments) is one of the better indicators of a business cycle that we have.”
According to an informal analysis of previous RV downturns, an annual shipment slide of 5% or more is followed the next year by a recession. That’s why the health of the industry is sometimes used to forecast what’s ahead for the economy.
Though still low by historical standards, Elkhart County’s seasonally unadjusted unemployment rate has been trending higher since October and stood at 3% in June — still below the unemployment rates for Indiana and the nation, though.
Manufacturers initially argued the slide was caused by excess inventory built up on dealer lots across the country, and indeed, that seemed to be initially supported by RV sales numbers that were still rising through most of 2018.
But since the first of this year, sales have generally been down in the mid-single digits at dealerships, said Phil Ingrassia, president of the Recreation Vehicle Dealers Association. “Overall, dealers are having a solid year, but some remained overstocked going into the year.”
Fueled, in part, by pent-up demand coming out of the recession, RV shipments grew for eight consecutive years before peaking in 2017 with more than 500,000 units shipped. Ingrassia described the current pace as more normalized and sustainable for manufacturers who were having a difficult time keeping up with demand during the peak.
“It’s hard to manage that kind of growth,” Ingrassia said, adding that he expects sales to stabilize this year before picking up again in 2020. “As long as consumer sentiment remains in a good place, people will make discretionary purchases.”
Kevin Broom, a spokesman for the RV Industry Association, agreed with that assessment.
But others questioned the impact of tariffs and whether the increased costs for materials could be pushing up prices for some products or reducing profit margins for manufacturers and dealers. “At some point, a company is going to have to show how much the tariffs have cost,” one insider said.
Hicks said there is no doubt tariffs have pushed up costs for the RV industry as well as other businesses. If some of those costs are being passed onto consumers, it would also explain to some degree why sales have been slowing.
“You can’t stop buying groceries, paying bills or putting a new roof on your house,” Hicks said. “But an RV is a luxury item, a discretionary purchase.”
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