RV Sales, Recessions, And All That Jazz -- July 27, 2019

Updates

August 20, 2019: see update here. 

July 29, 2019: see first comment for list of items that make up recreational services and vehicles.  It was noted by the reader that recreational services and vehicles have a greater impact on GDP than the auto section. Huge observation. Be sure to look at the original post to see how this all got started (it's linked below but here it is again). For government list, see this link: Chapter 5 of the NIPA handbook, page 12 & 13... https://www.bea.gov/resources/methodologies/nipa-handbook.

Original Post

The more time I spend on the zerohedge article regarding RV sales and the most recent (2Q19) consumer spending data, the more obvious it becomes the zerohedge contributor is/was really, really, really off-base.

My takeaways from that article:

• RV sales can be used to forecast US recessions (secondary thesis)
• US government bureaucrats fudge economic data (primary thesis)

Fallacies:

• equating an entire sector (recreation goods and vehicles) with one industry (RVs)
• suggesting government bureaucrats fudge quotidian data
• fallaciously annotating graphs 
• misreading graphs

We'll start with the FRED graphs regarding GDP and the arts, entertainment, recreation, accommodation, and food services.

Link here for FRED graphs.

The first graph is the original FRED graph with only minimal annotating.  Do your own "analysis" before looking at second and third graphs.

The second graph is the very same FRED graph with three periods compared. If you can see any trend suggesting a relationship between recreation expenditures and recessions you are doing better than I.

The third graph compares two periods that look similar but only one (period "A") precedes a recession (period "B" does not).  The same graph also compares two different periods that look very similar: period C (which did not lead to a recession) and period D (1Q19). Data for 2Q19 has not yet been posted by the FRED but it will show even stronger data.

This was a huge fallacy by the zerohedge writer: suggesting that RV sales could be a proxy for the entire sector. What a joke.

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An Alternate Universe -- A Water Universe

I prefer using boats (and associated water toys) as a proxy for this entire sector, not gas-guzzling RVs.

So, now boats.

Link here for boat article. From the article:

... retail unit sales of new powerboats were up an estimated 4 percent in 2018 to approximately 280,000 units, the highest total since 2007.

The outlook for 2019 remains positive with continued growth expected to bring a 3-4 percent increase in new powerboat retail sales.

As one of the country’s growing outdoor recreation activities, NMMA also announced that the recreational boating industry contributes an estimated $170.3 billion in economic activity to the U.S. economy, an increase of approximately $49 billion since the last time the association reported economic impact in 2012*.

From the article:

As retail unit sales figures are finalized for 2018, they’re signaling nearly all new powerboat categories saw growth last year, with the following categories leading the charge:

• Sales of new freshwater fishing boats are estimated to be up 2-4 percent to 75,000 units in 2018; fishing is the most popular activity done aboard a boat. 
• New personal watercraft sales are estimated to be up 6-8 percent to 68,000 units in 2018; with accessible entry-level price points, personal watercraft are often considered a gateway to boat ownership. 
• New pontoon sales are estimated to be up 4-6 percent to 58,000 units in 2018; the versatility of the latest pontoons offers an all-in-one experience from fishing to cruising to watersports. 
• Sales of new wakesport boats—popular for wakesurfing and wakeboarding and attractive to new and younger boaters—are estimated to be up 9-11 percent to 10,000 units in 2018. 
• New cruiser sales—boats between 22 and 32 feet, popular for relaxing, entertaining and ‘cruising’—are estimated to be up 2-4 percent to 9,000 units in 2018.

The top ten states for recreational boating economic activity are:

• Florida, $23.3 billion 
• California, $13 billion 
• New York, $8.4 billion 
• Texas, $7.7 billion 
• Michigan, $7.4 billion 
• Washington, $6.9 billion 
• New Jersey, $6.6 billion 
• Tennessee, $6 billion 
• North Carolina, $5.5 billion 
• Missouri, $4.5 billion 

Article updated, May 23, 2019.

Boat Dealers data, 2019 data.

• Five-year projection.

Article posted July 26, 2019. Includes the usual meme, "... the Trump tariffs hampered sales ...." but otherwise a great article.

Why millennials aren't buying boats:

• they still live at home with their parents and use their parents' boats
• minimum wage income is not enough to afford a boat
• tweeting and social media is so much more fun
• a boat? Heck, we don't even have a car.

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Most Egregious Graphic With A Two-Fer

I will post the graphic from the linked zerohedge article without any annotation to give you a chance to look at it before reading my comments:

Regarding the graph on the left. The writer suggests a relationship between recessions and RV sales. Ludicrous on the surface. Not only does the graph not support the thesis, but it covers a very, very limited period of time (what were RV sales like in 1929?).  But even worse, the writer pins his thesis on the 2018 RV sales (most recent data on the graph). Look at that huge string of record sales, and the writer is concerned with an almost negligible pull back in 2018. Good grief. Give me a break

The graph on the right. If you didn't spot this one, you weren't paying attention. If you missed what I'm seeing in the graph on the right, let me help you out:

Note the upsurge in RV sales month-over-month for the past few months. My hunch: the writer was absolutely aghast to see his/her thesis fall apart, but he/she tried to obfuscate by putting a big, red, interrupted red arrow suggesting a continuation of the downward trend which ended in January.

Bottom line: RV sales -- another data point suggesting there is no recession "right around the corner."

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Miscellaneous Comments

The author was really more interested in suggesting a bureaucratic conspiracy to fudge government data rather than talking about RV sales and recessions. If the article had only been about RV sales and recessions, it would not be worthy of zerohedge. It would simply be another boring "dog bites man" story, or in this case, another "the-next-recession-is-right-around-the-corner" story.

Even a broken clock is correct twice a day, and when the recession occurs, there will be any number of pundits clamoring for credit having predicted it.

On the other hand, the zerohedge contributor suggests that government bureaucrats are fudging quotidian data. These bureaucrats are life-long, career office-workers, many of them third or fourth generation bureaucrats. Sure, the guys and gals at the top are political appointees but most are hold-overs from previous administrations. This is the swamp. There is no reason in the world for these bureaucrats to fudge the data, the data that has recreational sales and vehicles as the number 1 consumer expenditure in 2Q19. Why would they even care? It doesn't even support the NYT or Washington Post narrative.

I don't have any problem with zerohedge contributors suggesting politicians misinterpret (and outright lie) about data but I don't buy into conspiracy theories that mid-level bureaucrats are fudging data.

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Bottom Line

I loved the breakout of the consumer spending sectors at the linked zerohedge article but the article itself is crap.

Disclaimer: I am inappropriately bullish about America. I am a keen Trump supporter. I sort of appreciate free market capitalism. I "respect" recessions, but I don't fear them.

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