At the start of May, Americans’ faith in the economy was strong and economic indicators pointed toward rising consumer activity, suggesting that the recreational boating industry could find continued success during the spring and summer selling seasons this year.
After a damp, chilly April that appeared to delay some spring boat purchases, the weather warmed as the calendar turned, raising hopes among dealers for the spring and summer that more buyers will visit them online and in their showrooms.
Two measures of the public mood posted strong readings at the end of April. One was the Conference Board’s Consumer Confidence Index, which rose to 128.7, a level that was near the highest the index has reached since 2000.
The gauge had slipped in March, but rebounded for a moderate gain, according to Lynn Franco, director of economic indicators at The Conference Board.
“Consumers’ assessment of current conditions improved somewhat, with consumers rating both business and labor market conditions quite favorably,” Franco wrote. “Consumers’ short-term expectations also improved, with the percent of consumers expecting their incomes to decline over the coming months reaching its lowest level since December 2000 (6 percent). Overall, confidence levels remain strong and suggest that the economy will continue expanding at a solid pace in the months ahead.”
Jim Coburn, managing partner of Coburn & Associates Consulting, says the index is now running, on average, 20 points higher than it did in 2016.
“Like so many others, the marine industry historically performs best when CCI is over 100,” he says. “That’s been a layman’s good rule of thumb.”
The other measure of the public mood that looked good was the University of Michigan’s final Consumer Sentiment Index for April, at 98.8, nearly equal to the 2018 average to date. Richard Curtin, chief economist for the university’s Surveys of Consumers, says that average is the highest since 2000, “which was, in turn, the highest yearly average in more than a half-century.”
Curtin says tax-law changes and President Trump’s trade policies generated a lot of unsolicited comments among survey respondents, many of whom cheered the former and booed the latter.
“Aside from the offsetting impact of Trump’s tax and tariff policies, the best simple summary of the current state of consumer confidence is that the economy is ‘as good as it gets,’” Curtin says. “While consumers do not anticipate an economic downturn anytime soon, the long expansion has made consumers (and economists) somewhat apprehensive about future trends.”
The U.S. Department of Commerce reported that personal income rose by $47.8 billion, or 0.3 percent, in March. Consumer spending rose by $61.7 billion, or 0.4 percent, climbing for the first time since the end of last year. Both figures were the most recent data available.
Fourth-quarter 2017 consumer spending was strong — the holiday shopping season was the best in eight years — and the March increase suggested that American families had regained their appetite for new goods and services, and had the resources to pay for them.
Coburn says the economy appears healthy as the second quarter moves forward. His favored economic indicators are consumer confidence, employment and light-vehicle sales.
“In economic terms and indicators, the prospects for U.S. new boat sales and the recreational marine industry are pretty good for this summer,” says Coburn, whose titles also include director and secretary-treasurer of the Michigan Boating Industries Association.
Coburn says he also watches personal income and consumer spending, mixed with payroll, disposable-income and retail-sales figures, all of which “are performing at productive rates at this time.”
“Annual retail spending on all boating is at $37 billion and may likely get close to $38 billion by the end of this year,” he adds. “We believe overall new-boat unit sales will not exceed 10 percent this year. However, the growth numbers for the industry have been consistent over the past few years. We expect more of that this year. Simply put, that means more steady growth.”
Coburn says light-vehicle sales “have been performing well since the Great Recession and have been a decent leading indicator for recreational marine sales. Their average seasonally adjusted annual sales have averaged over 17 million units since 2014.”
The Commerce Department says growth, as measured by the nation’s gross domestic product, was the slowest in a year during the first quarter of 2018. Businesses stepped up their investments, enabling the economy to grow at a seasonally adjusted annual rate of 2.3 percent.
Bloomberg says analysts expect a rebound this quarter because income-tax cuts have put more money into people’s pockets and the job market remains strong.
“The biggest question is what’s going to happen in the second quarter,” Jacob Oubina, senior U.S. economist at RBC Capital Markets, tells Bloomberg. “The labor market is seemingly still getting better, wages are finally starting to increase and you’re getting a tax cut on top of all that.”
Job growth was solid in April, though at 164,000 it represented a slower pace than economists expected. Encouragingly — because they typically pay more — the categories that showed the greatest increase were professional businesses, which added 54,000 jobs, and manufacturing, which added 24,000.
The unemployment rate fell to 3.9 percent because the labor force shrank.
“Economists still foresee continued employment growth and a declining or stable unemployment rate,” Coburn says. “We see no major issues here, as economist forecasts suggest the rate could average about 3.9 percent by the end of the year and maybe a bit lower for the year in 2019.”
Wage growth was again restrained, as it has been throughout the nation’s long recovery from the recession. The U.S. Department of Labor says hourly pay rose just 0.1 percent, or 4 cents, to $26.84.
The news about pay is positive for those who worry about how many interest-rate increases the Federal Reserve may approve this year, but stagnant salaries can make it more difficult for families paying a mortgage to afford new big-ticket spending on items such as boats.
“The labor market is heating up with workers in short supply, but companies are still not paying up to bring in help despite one of the tightest labor markets in a generation,” Chris Rupkey, chief financial economist at MUFG Union Bank in New York, tells The Los Angeles Times. “Fed officials can rest easy that there is not any wage-based inflation on the horizon and keep the economy on course with their projections for three rate hikes in 2018.”
Despite the slow pay growth, the housing market remained strong in March. New-home sales were at a four-month high, and existing-home sales rose 1.1 percent from February, even though the home-resale market was extremely tight.
The Commerce Department says sales of new homes totaled 694,000 at a seasonally adjusted annual rate, 4 percent higher than the upwardly revised February rate of 667,000.
The pace exceeded economists’ expectations.
The government also says the median sales price of new houses sold in March was $337,200; the average sales price was $369,900.
“Americans appear to think the economy is headed in the right direction, and it’s not just all talk because their greater confidence is leading them to buy more new homes,” MUFG’s Rupkey tells Reuters. “Everywhere you look, confidence seems to be a rising tide that will lift all the boats.”
The National Association of Realtors says sales of existing homes were at a seasonally adjusted annual pace of 5.6 million in March, up from 5.54 million in February, although the trade group says low inventory and high prices kept sales below year-earlier levels.
“Robust gains … in the Northeast and Midwest — a reversal from the weather-impacted declines seen in February — helped overall sales activity rise to its strongest pace since last November,” Lawrence Yun, chief economist for the NAR, stated.
“The unwelcoming news is that while the healthy economy is generating sustained interest in buying a home this spring, sales are lagging year-ago levels because supply is woefully low and home prices keep climbing above what some would-be buyers can afford,” Yun adds.
The NAR says the median existing-home price for all housing types in March was $250,400, up 5.8 percent from $236,600 in the same month last year. The increase marked the 73rd month in a row of year-over-year price gains.
“Although the strong job market and recent tax cuts are boosting the incomes of many households, speedy price growth is squeezing overall affordability in several markets — especially those out West,” Yun says.
This article originally appeared in the June 2018 issue.