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Dealers need to stay vigilant in this economy

There’s no denying we continue to see modest improvement in boat sales as the economy delivers slow growth. But as dealers approach a new model year, attend dealer meetings and project orders, there are some clouds on the horizon that could upset any sustained growth and dealers should remain particularly alert to current issues and events.

On the positive side, Reuters has reported that the newest Grant Thompson survey reveals that 51 percent of CFOs expect the economy to continue to improve. It’s the first time since 2006 that that percentage has topped 50 percent. Even more respondents in the manufacturing sector (56 percent) look for improvement in the next six months.

But how things can change. Suddenly there’s the Iraq situation and its impact on the stability, or lack of it, in the region. Moreover, since oil is the geopolitical “currency” of the Middle East, the current near-civil war in Iraq and the vulnerable oil fields is already tapping more of what would have been consumers’ disposable income.

But the elephant in the room isn’t the Middle East. It’s here at home and it’s called inflation. Yes, I know the Fed keeps saying there’s no real inflation and prices won’t be rising for some time to come. So why do I think the numbers the Fed throws out are missing the boat? For one thing, this week’s Consumer Price Index report seems to uphold what my wife has been telling me: “prices are going up fast!”

Witness: You want eggs and bacon? Eggs are up 10 percent, bacon 15.3 percent and, if you want juice with your breakfast, oranges are up 17 percent. What about beef and poultry prices? My wife won’t even talk about them, but I’m thinking I should sell some gold and hold chicken wings.

Overall, food prices are reportedly up 0.5 percent, the most in nearly 3 years. Add to that the family’s prescription drugs have jumped 3.6 percent this year.

Witness: If you travel, you’ll pay 5 percent more for your hotel room and your plane ticket will cost you another 5.8 percent more than it did just 6 weeks ago — the biggest monthly increase since July 1999. So save the money and drive — besides your gas cost rising (I paid $3.89 per gallon for car, $5.05 per gallon for boat last weekend), your auto insurance has gone up 4.8 percent since last year. Ah, but my boat insurance stayed the same. Oops, just realized my higher deductible for hurricane damage now also applies to any “named storm” damage.

The bottom line: When we consider that the “core” CPI, which does not include food or energy prices, still rose 0.3 percent in May, the biggest monthly increase since August 2011, the Fed’s idea that there’s no inflation has me more than concerned.

There’s no getting around it. When what would have been discretionary income must be tapped for ordinary expenses, consumer spending (70 percent of the economy) can tank and the fragile economic growth we’re seeing could slow or stop.

With these kind of concerns, it important that retailers be vigilant when planning for the next six to 12 months.

Comments

3 comments on “Dealers need to stay vigilant in this economy

  1. Richard Rylander

    Finally, a columnist that gets it! No 1 deterrent to boat sales, the eroding of personal discretionary income. No 2 the intense competition from other sports participation by young families.

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