Things ‘going in the right direction’

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The mood at the Miami International Boat Show was upbeat and the economic and sales projections of speakers at industry events during the February show reflected that.

Light-vehicle and recreational-vehicle sales are back to almost 90 percent of their pre-recession peaks and recreational boating sales remain a little under 50 percent of their pre-recession highs, but the industry is catching up, NMMA president Thom Dammrich said at the State of the Industry breakfast on the show’s opening day.

New powerboat, sailboat and personal watercraft sales were up 5 percent from 2012 to 2013, he says, and he expects new-boat sales to grow another 5 to 7 percent in 2014.

Add used-boat sales, which totaled 1.2 million units in 2012, and Dammrich says there’s a message in the numbers: “The American public still loves boats,” he says. “They still love getting on the water. Things are going in the right direction.”

Another good sign: The industry remains a net exporter. It exports more boats than it imports, and except for Australia, the economies of the industry’s main overseas customers — Canada, Mexico, Japan, Italy, Brazil and Germany — are expanding.

“We are optimistic” going into 2014, said Bruce Van Wagoner, president of the Commercial Distribution Finance Marine Group, at a conference hosted by GE Capital and the National Marine Manufacturers Association and appropriately titled “Riding a Wave of Optimism.”

Dammrich said dealer sales are up, dealer costs are falling, inventory turnover is improving and earnings are up. In 2010, 25 percent of dealer inventory was more than a year old; today it’s closer to 13 to 14 percent, a level that can sustain profitability, he said.

Meanwhile, speaking at the conference on the economy, Rob Podorefsky, managing director of the GE Capital Interest Rate Management Group, projected real U.S. GDP growth of 2.5 to 3 percent in 2014. He expects some adverse short-term effects from unseasonable winter weather and last year’s unsustainable inventory accumulation, but there are other helpful developments: 16 straight quarters of rising consumption, a gradually improving labor market, steadier gasoline prices, more investment in homes, rising home prices, increases in spending on services and improved business investment.

He said the Federal Reserve’s paring of asset purchases will continue. “Data would have to be particularly weak and markets would have to get unruly to the point it posed downside risk to the economy” for the Fed to stop the tapering, Podorefsky says.

He said the Federal Reserve is not close to raising short-term interest rates, but “market-based interest rates are vulnerable to shift. A near-term economic soft patch supports lower rates for now while greater confidence in the economy later this year, combined with fewer Fed asset purchases, would most likely be accompanied by higher interest rates and expectations of less Fed support in the coming years.”

Near-term, commodity prices should be “well behaved,” meaning little inflation, he says; medium term, a tighter labor market could pose a risk of inflationary pressure. He says the eurozone “is in a better place” than it was last year at this time.

Overall, a good report from the folks who are closest to these matters.

This article originally appeared in the April 2014 issue.

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