Two Truths and an RV

Two Truths and a Lie is a game where the players gather in a circle and, one by one, each person in the circle says three statements about him/herself. Two of these statements must be facts, or “truths,” and one must be a lie. The other members then try to guess which statement is the lie.

Let’s try a variation of this game. Let’s call it two truths and an RV. The first truth: RV sales are tanking. The second truth: RV sales are booming.

From the RVIA:

The RV Industry Association’s March 2020 survey of manufacturers found that total RV shipments ended the month with 30,288 units, a decrease of (-20.3%) from the 38,015 units shipped in March 2019.

Towable RVs, led by conventional travel trailers, totaled 27,723 units for the month, a decrease of (-17.9%) compared to last March’s total of 33,754 units. Motorhomes finished the month with 2,565 units, down (-39.8%) compared to the March 2019 total of 4,261 units.

Park Model RVs finished the month down (-12.9%) compared to last March with 364 wholesale shipments.

From the Chicago Tribune:

Demand for RVs grows as coronavirus crisis changes the way we travel. ‘I can see so many people doing it this summer.’

I see this second truth about RV demand booming being amplified in the RV press. Even Marc and Julie from RV Love parrot the same RV industry talking points in their latest newsletter:

We remain optimistic about the future of campgrounds and RVing this year, after the results of last week’s camping survey (more on that in a bit). Not to mention more news about an RV being the safest way to travel in the media, including yesterday’s article in the Wall Street Journal. And while many of us have been doing this for years, millions are only just now beginning to discover RV life, and we sense we’re on the verge of a boom.

RV sales are tanking. RV sales are booming. One of these two truths is a lie.

Perhaps a bit more context might help you decide which one is true.

This was from the Indiana Business Review before COVID-19:

The recreation vehicle (RV) industry is the pillar of the Elkhart-Goshen economy. According to RV Industry Association statistics, total shipments declined 4.1 percent in 2018 from the 2017 record. Furthermore, RV shipments have fallen 20 percent cumulatively in January-August 2019 from 2018. More than 50 percent of the recreation vehicles sold in the U.S. are produced in Elkhart-Goshen. The decline in RV sales plus a slowdown in the nation’s auto sales signals a downturning economy, especially for Elkhart-Goshen.

In 2020, more negative factors will confront the Elkhart-Goshen economy. Higher tariffs already increase the production cost of RVs. The ongoing trade war with China will likely further affect RV exports. Dampening consumer confidence indicates consumers are less optimistic about the economic future. With continued uncertainty in international trade and rising expectations of an upcoming recession, consumers will spend more cautiously and tend to first cut expenses on big-ticket discretionary items like RVs. The adverse shocks to the manufacturing sector could be mitigated by other growing sectors, such as construction, educational and health services, leisure and hospitality, and other services. Hence, GDP growth is likely to change little or be stagnant in 2020. The labor market will also adjust to the softening RV sector, which might scale back its production. Consequently, the unemployment rate will be higher in 2020, trending up to 3.5-4.0 percent.

RV sales are tightly linked to the Consumer Confidence index as shown by this chart:

What is the latest view on the Consumer Confidence index?

“Consumer confidence weakened significantly in April, driven by a severe deterioration in current conditions,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The 90-point drop in the Present Situation Index, the largest on record, reflects the sharp contraction in economic activity and surge in unemployment claims brought about by the COVID-19 crisis. Consumers’ short-term expectations for the economy and labor market improved, likely prompted by the possibility that stay-at-home restrictions will loosen soon, along with a re-opening of the economy. However, consumers were less optimistic about their financial prospects and this could have repercussions for spending as the recovery takes hold. The uncertainty of the economic effects of COVID-19 will likely cause expectations to fluctuate in the months ahead.”

These comments yesterday, from Evan Siddall, head of Canada’s housing agency, provide another perspective:

Canadians are among world leaders in household debt. Pre-COVID, the ratio of gross debt to GDP for Canada was at 99 per cent. Due in part to increased borrowing but even moreso to declines in GDP, we estimate it will increase to above 115 per cent in Q2 2020 and reach 130 per cent in Q3, before declining. These ratios are well in excess of the 80 per cent threshold above which the Bank for International Settlements has shown that national debt intensifies the drag on GDP growth.

Looking at debt multiples of disposable income, that measure will climb from 176 per cent in late 2019 to well over 200 per cent through 2021. Moreover, CMHC is now forecasting a decline in average house prices of 9 – 18 per cent in the coming 12 months. The resulting combination of higher mortgage debt, declining house prices and increased unemployment is cause for concern for Canada’s longer-term financial stability.

RV sales are tanking. RV sales are booming.

And the numbers over the next few months will tell us which one is true.