Are RV Sales Predicting A Recession?

The confidence of stock market investors continues to grow. Bulls believe that increased artificial intelligence (AI) spending will fuel stocks for some time and that still-high but moderating inflation readings will cause the U.S. Federal Reserve and other central banks either not to raise interest rates further or increase them perhaps just one more time this cycle. In turn, the U.S. economy could realize the softest of landings or perhaps fully dodge recessionary conditions.

While this “Goldilocks” scenario could play out in this fashion, some alternative economic indicators are flashing red. For example, sales of recreational vehicles (RVs), perhaps the most discretionary of all purchases for many Americans, have been plunging since mid-2022. Indeed, RV sales have been more than cut in half so far in 2023, according to the RV Industry Association.

RV Shipments in 2022 (Gold) Versus 2021 (Blue)

RV Shipments Thus Far in 2023 (Gold) Versus 2022 (Blue)

Why is this important? Prolonged declines in RV sales have a good track record of predicting recessions. Indeed, RV industry sales downturns lasting two years or longer preceded recessions in the early 1980s, early 1990s, and in 2001. If current weak RV sales trends hold for several more months, the same precedent condition could come into place.

We note that RV sales did not really weaken before the 2008-2009 Great Financial Crisis, but sales collapsed during the crisis. Annual unit sales plummeted from nearly 400,000 in 2005 and 2006 to around 165,000 in 2009.

It is of course possible that the RV sales declines in 2H 2022 and so far in 2023 represent some sort of normalization from strong sales during the COVID pandemic. Such a normalization is possible, but the declines over the first four months of 2023 are breathtaking.

Separately, another quirky (but quite rational) economic indicator, cardboard box shipments, are indicating the economy is quite soft. For example, per the Fibre Box Association, cardboard box shipments fell 8.4% year-over-year in 4Q 2022, the biggest decline since the 2Q 2009 peak of the Great Financial Crisis.

Moreover, conditions do not seem to be improving. FreightWaves, which compiles data on the global freight market, recently surveyed independent North American box makers and released disappointing results from their conversations with manufacturers. The typical box maker reported that box volumes fell even more rapidly (-12% year-over-year) in 1Q 2023 than in 4Q 2022.

Information for this story was found via Bloomberg and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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