Addressing the All-Industry Breakfast at the recent Progressive Miami International Boat Show, NMMA President Thom Dammrich predicted continued industry growth this year, although he acknowledged there could be a dip from 5 to 6 percent to about 3 to 4 percent growth.
A minor decline like that really shouldn’t surprise anyone, since 2019 could be our eighth consecutive year of increased boat sales. But we live in a free market system with a history of guaranteed periods of growth always followed by recession, then more growth.
It may be hard to grasp right now, since boat sales at winter shows are going so well, and I certainly have no crystal ball. I am, however, concerned that our current long growth cycle is on its last legs. Even more, there’s concern that after so many consecutive good years dealers have tended to become shortsighted. That begs the question: Is your dealership prepared for leaner times?
The question becomes even more realistic when it’s reported that 42 percent of U.S. economists surveyed by the National Association of Business Economics predict a recession in 2020. Regardless of dates, we know that no boom is ever perpetual. Moreover, the Federal Reserve wrapped up its meeting yesterday by scaling back any projected interest-rate increases to zero this year. The Open Market Committee is standing on its January language that it will be “patient” amid “global economic and financial developments and muted inflation pressures.”
That’s a meaningful reversal from the Fed’s previously announced plan for multiple interest increases this year. Indeed, the central bank’s new theme of patience in raising rates reflects its intended calming response to slower economic growth here and abroad, and a desire to relax an edgy stock market.
It’s a fact that when times are good, dealers can get comfortable and, rather than always looking at key operating things like cost savings, actually overspend without realizing it. But it’s during the good times, like those we’ve been in, that astute dealers will be preparing for the down times guaranteed to be ahead.
A long-time friend and successful dealer in Ohio told me he’s concerned. While I won’t name him, his son took over the dealership about seven years ago and has since known nothing but steady annual growth. However, his dad shared with me that he has voiced concern that his son hasn’t yet managed the dealership through a downturn. The dad quips: “I suspect my son may be working through his first one sooner than he thinks!”
The only advice I could give my friend was to keep sharing his wisdom and experience and hope his son listens. “Tell your son what I used to tell mine,” I advised. “It’s what you learn after you know it all that counts!”
Clearly talking about a slowdown or recession in the absence of very hard evidence can be counterproductive. Say it enough and it could become a self-fulfilling prophecy. That’s not the purpose here. And we must recognize that recent issues like unsettled tariffs and trade uncertainties haven’t exactly been uplifting. But with the Fed now settling the interest rate question and the hope that trade issues will also settle down, there is a good chance we can continue to enjoy continued growth this year.
Further, the Trump Administration claims the economy will keep booming over the next decade, based on plans to get a big infrastructure bill, landing more tax cuts, seeing additional deregulation, and implementing policies that continue to increase full-time jobs. But it gets real when one recognizes it will take cooperation from Congress to pass such major new legislation.
Regardless, with all this backdrop, there’s a strong signal to all dealers that the time is now to seriously prepare for the next economic dip. It means businesses with cyclical revenue streams must be examining their debt loads today to make debt servicing manageable down the road. It means having a plan with prompt adjustments to every operation, from inventory to personnel, is worth reviewing now, so that whatever happens, the dealership is ready.