There’s an under-the-radar indicator of economic health that’s flashing red in 2023. Sales of RVs are on the decline this year, pointing to a weaker consumer and a softer economy. This trend is not just a concern for the RV industry but also serves as a bellwether for the broader economy.
RV sales are considered a classic rate-sensitive discretionary purchase. When money is cheap and consumer confidence is high, people borrow to buy an RV and hit the road.
However, the decline in RV sales this year, down more than 50% according to data from the RV Industry Association, suggests a shift in consumer behavior and economic conditions.
Michael Hicks, a professor of economics at Indiana’s Ball State University, suggests that RV sales are actually better than economists at predicting a downturn. This is because RVs are a significant purchase, often financed, and are among the first things consumers cut back on when they feel economic uncertainty.
According to a report by the Markets Insider, the decline in RV sales could have significant implications for the industry. It could lead to a decrease in production, job losses in the manufacturing sector, and a slowdown in related industries such as parts suppliers and dealerships.
The impact could be particularly severe in regions where the RV industry is a significant employer and economic contributor.
The decline in RV sales also has broader implications for the economy. It suggests that consumers are becoming more cautious in their spending, which could lead to a slowdown in other areas of discretionary spending. This could, in turn, lead to slower economic growth.
However, it’s important to note that the RV market was heavily distorted by the pandemic, and this year’s sagging sales could just be a normalization after a COVID-fueled buying spree. The pandemic led to a surge in RV sales as people sought safe ways to travel and vacation while maintaining social distancing.
The current economic environment is increasingly confusing, with the Federal Reserve’s rate hikes, a smoking-hot labor market, and inflation that’s still uncomfortably high.
Policymakers and economists alike have a lot to consider. Unemployment is the lowest since the 1960s, ostensibly a good thing for the economy, but it may also be helping to keep inflation elevated.
Wall Street is heavily divided on recession odds, and corporations are defying calls for an earnings recession by powering through this reporting season with much more upbeat results than had been feared. Despite Fed tinkering, there hasn’t been a recession so far, but one may be close at hand.
In the meantime, RV sales, along with other lesser-known indicators like egg prices and cardboard box demand, might be the indicators to keep the closest eye on. These indicators provide a unique perspective on the health of the economy and consumer behavior, offering insights that traditional economic indicators may miss.
