April 22, 2024

Why RV sales are a surprisingly accurate economic indicator

Tesla is expected to signal a slowdown in sales tomorrow when it announces first quarter delivery figures. The electric vehicle maker is facing stiff competition from Chinese manufacturers, not to mention EV sales have hit some bumps across the board. But another segment of the vehicle market has been hurting even more: RVs. Motorhomes and towable trailers had their worst year in more than a decade in 2023

Now there are signs that slump could be reversing, which could be a positive indicator for the economy as a whole.

A lot of economists like to watch things like bond rates or household consumption trends, but Michael Hicks at Ball State University looks to the campground.

“RVs do extraordinarily well in predicting business cycles because they’re such a big, volatile consumption piece for most American consumers,” he said.

They often cost hundreds of thousands of dollars, so sales tend to drop at the slightest hint of bad economic news and pick up again when consumers are feeling better. 

But as with so many aspects of the economy, things got weird in the pandemic, said James Ashurst at the RV Industry Association.

“I think a winding road is a great sort of way to depict how the industry has been,” he said.

Ashurst said RV sales took off as Americans looked outdoors for social-distance-safe activities, then decelerated down almost 50% from their 2021 peak.

Higher interest rates have also cut into demand. “Most of the products that we sell are financed,” Ashurst said.

But with the Fed signaling rate cuts later this year, RV buyers who’ve been biding their time might make a move, said analyst David Whiston at Morningstar. 

“I’m not worried about a permanent reset below pre-COVID levels, for example,” he said.

Manufacturers Winnebago and Thor both recently forecast a rosier end of the year, and overall RV shipments are already up 15% over last year. So the “RV Index” is looking good.

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