Boatbuilding is forecasted to plateau later this year, according to a group of economists who analyze the U.S. boating industry. ITR Economics issued a report on boatbuilding to NMMA members last week, saying that changes are expected.
ITR economist Connor Lokar, who authored the report, told Trade Only Today that the forecast follows the group’s expectations for the U.S. economy at large. “Boatbuilders saw double-digit growth rates in the last year and a half,” Lokar said. “It’s been their best stretch for many years, but we expect things to slow down. We’re expecting a softening in 2019 and early 2020.”
Lokar pointed to such signals as a weak fourth quarter for the stock markets, U.S. consumers “becoming a bit more apprehensive,” and a global economic slowdown giving builders pause later in the year. “We expect GDP to be lower this year, and since, historically, boatbuilding is co-related to the U.S. economy’s ebbs and flows, we expect to see a slowing in boatbuilding.”
The stock market “shock” of the fourth quarter could impact recreational sales going forward. “We’re already seeing a slowdown in the recreational vehicle industry,” Lokar said. “For boating, it would help if we see the stock market continue to rally as it has, though we’re a bit skeptical that it will sustain it. The consumer seems to be less confident by the day.”
Lokar said there tends to be a two- or three-month lag between economic cycles and consumer purchases of big-ticket items, such as boats.
The economist group remains a “little concerned” that there might be excess inventory with boatbuilders as consumers “slow down” with recreational purchases. “We expect this peak selling season will underwhelm, particularly relative to the last few years,” Lokar said. “The consumer and the economy are in different positions than they were last year. We were on the heels of tax reform last year; there was no global trade war and no global slowdown.”
ITR expects the economic slowdown to be over a five- to six-quarter period, according to Lokar. “We should be feeling better by the summer of 2020 and through the second half of that year.
“The term ‘soft landing’ seems appropriate for this cycle,” he said. “We don’t expect GDP rates to drop below zero, so it won’t be anything like the Great Recession. It’s more reminiscent of the early 2000 period.”
Lokar said the stock market tends to be the “wild card” for boat purchases. “There’s a very nice co-relation with boat purchases and the stock market,” he says. “It’s one of our leading economic indicators. Once you see a turn in the stock market, boat purchases and then boatbuilding are impacted. We’re watching to see where it goes over the next few months.”