Skip to main content

Inflation, Rate Hikes Hurting Entry-Level Market

1_FED.RATE.HIKE

After the Federal Reserve fired its latest salvo against inflation by increasing interest rates by 0.75 percentage points yesterday, a recreation industry analyst said the low end of the boating market is beginning to suffer.

“Obviously, in a tightening rate environment and expectations for slowing economic growth and the consumer pulling back on spending, it doesn’t bode well for discretionary purchases,” Michael Swartz, director of equity research at Truist Securities, told Trade Only Today yesterday after the rate hike.

The Federal Reserve increased the federal funds rate to 2.25 to 2.5 percent yesterday. After two consecutive 75-basis-point hikes, chairman Jay Powell said the pace of increases may slow for the remainder of the year. That helped U.S. stocks surge by the end of trade yesterday, with the Nasdaq Composite gaining 4.1 percent and the S&P 500 adding 2.6 percent.

“Recent indicators of spending and production have softened. Nonetheless, job gains have been robust in recent months, and the unemployment rate has remained low,” the Fed said in its statement. “Inflation remains elevated, reflecting supply-and-demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.”

The food and energy inflation have stymied consumer discretionary spending among Americans who would be candidates to buy entry-level boats, Swartz said.

“The dealers have not seen a slowdown in demand writ large,” he said. However, the “lower end of the market is starting to show signs of slowing down. That consumer pulls back, and the $600-a-month boat payment is just not feasible.”

Otherwise, boatbuilders and retailers still enjoy an overall customer base with gainful employment, higher incomes, and ample savings and credit availability, Swartz said. A lack of boat inventory remains a more significant problem than the economic conditions, he said.

“That has been the biggest pressure point for the past year, and it hasn’t gotten any better this year,” Swartz said.

In his press conference after the hike announcement, Powell said it is improbable that the U.S. economy is in a recession, but he said the next likely stage is “growth below potential” and “some softening in labor market conditions.”

This morning, the Commerce Department reported that U.S. gross domestic product declined by 0.9 percent in the second quarter. It was the second consecutive quarter of lower GDP, which meets the technical definition of a recession although other indicators do not point to a recession at this time.

Related

VOLVO-EARNINGS

Volvo Penta Reports Q4, FY22 Results

Net sales of $470 million for the quarter were a 33% increase compared to the prior year period.

Pulse-Report

DEALERS: Are You Improving the Service Experience?

Our monthly Pulse Report survey asks this and other questions about your dealership. Take the survey here.

NMRA-SCHOLARSHIP

NMRA Sets Scholarship Deadline

Students pursuing education in the marine trades can apply for the National Marine Representatives Association awards until April 1.

MARINE-PRODUCTS

Marine Products Reports Record Q4

The builder of Chaparral and Robalo boats reported net sales were up 42% for the quarter and 28% for fiscal year 2022.

1_SHURHOLD

Shurhold Appoints COO

Forrest Ferrari has years of management, business development, IT and quality-assurance experience.

MOBILE-CATCH-CENTER

RBFF, Pure Fishing Partner for a First Catch Center

Pure Fishing will equip a mobile trailer with tackle and gear to bring fishing experiences to areas of South Carolina where participation is low.

Norm

An Oft-Overlooked Sales Opportunity

A recent report from the Recreational Boating & Fishing Foundation showed that women comprise 37% of all anglers. If you haven’t tapped this segment, you’re missing out.

1. 2023 new boat retail outlook

Too Many High-Priced Boats

To wrap up 2022, marine retailers reported lower demand, expressed more negative sentiment and voiced concerns about rising inventory. Boat prices and the economy remained top of mind for dealers in December.

Soundings Nov 2022

New-Boat Registrations Continue to Slide

As the gaudy sales figures from the pandemic continue to return to more realistic numbers, the main segments of the recreational boating industry saw new-model registrations of 4,421 in November, a 30.3% drop from 6,340 during the same time in 2021. .