A View from Here

Bill's Sisson's weekly Trade Only blog

‘Spring swoon’ not in the forecast

New-boat sales have cooled during a chilly spring, but experts think the economy will weather the sequester and builders and dealers are upbeat.

Sure, new-boat sales numbers for the last couple of months could be better, but it’s still too early to be calling it a “spring swoon,” especially given the lousy weather across large sections of the country.

“I think that’s quite a bit of it,” says Ryan Kloppe, the national marine sales manager for Statistical Surveys. “March was 80 degrees last year. We got off to a quick summer and it stayed warm all year. I think you’ll see an uptick” once things warm up.

Still, the numbers bear watching. Sales of 11-to 40-foot outboard fiberglass boats were essentially flat in March, compared with the same month last year, and sales of aluminum pontoon boats rose a scant 1.3 percent. Those two segments were strong growth engines last year.

“What drives the pontoon market?” Kloppe asked rhetorically. “The Midwest — and we’re having snow today. People aren’t in the boating mood yet. Weather is a factor. It has to be.”

The early numbers reflect 27 states, or about 63 percent of the U.S. boat market. “It will be interesting when the first-quarter numbers come out in June,” says Kloppe, at which time the reports will reflect sales numbers from 48 states (Maine and Hawaii report annually).

Kloppe is not in the prediction business, but what he’s hearing from the folks he talks to suggest that new-boat sales will finish the year up somewhere between 4 and 8 percent. New-boat sales last year rose 9.6 percent.

Might this be the year we dodge the macro headlines? The Wall Street Journal on Monday trumpeted: “Economic Woes Abroad Bode Ill for the U.S.”

The analysis by Sudeep Reddy begins thusly: “Troubles overseas are threatening the U.S. recovery for the fourth year in a row. … The renewed fears of a global slowdown come after months of hope that a stronger recovery was finally taking shape.”

Bloomberg.com reported several days ago, “Like a horror movie with multiple sequels, The Economy: Spring Swoon IV probably won’t be as surprising or as scary as its predecessors.”

What’s different this time, the Bloomberg.com writers ask? For starters, the slowdown has been expected. Click here for the full report.

Bloomberg opines: “The deceleration is coming in response to an identifiable cause — the biggest federal budget tightening in more than 60 years  — rather than inchoate fears about a breakup among countries that use the euro, a Treasury-debt default or a hard landing for China’s economy. And the U.S. looks better prepared to withstand it, thanks in part to a rebounding housing market.”

Mark Zandi, chief economist at Moody’s Analytics Inc., is quoted as saying the impact on the economy from tax increases and spending cuts will amount to 1.5 percent of gross domestic product this year, according to the Bloomberg piece. That’s the most since 1950, when military outlays were reduced after World War II, Zandi told reporters.

That estimate, the Bloomberg report continues, includes the effect of $85 billion in automatic budget cuts, known as sequestration, which began March 1 and, according to some reports, will reduce GDP this year by 0.6 percentage point.

Zandi sees growth easing to an annual pace of 1.5 percent in the second quarter from 3.4 percent in the first before picking up to 3 percent in the final three months of 2013, according to Bloomberg.

“It felt scarier a year ago, two years ago,” Zandi told Bloomberg.com. “The threats we were facing felt more existential and were impossible to handicap,” a reference to the Greek financial woes and fears of a U.S. debt default.

So that’s the big picture. Shifting back to the world of boats, attendance at the recent Suncoast Boat Show in Sarasota, Fla., was up a healthy 17 percent and dealers and builders were upbeat, according to Trade Only executive editor Chris Landry, who attended the show. “The mood was good,” says Landry who talked to a number of exhibitors.

I’ve heard much the same sentiment in the Northeast.

“Our business has been through the roof,” says Jon Lyons, 31, sales manager for Ocean House Marina in Charlestown, R.I., a dealer for Regulator, Scout, Yamaha, Godfrey Pontoon Boats, Maritime and other brands. “Regulator sales have been very, very solid. Used boats have been unbelievable. We can’t keep anything in stock.”

This past week, Ocean House Marina celebrated 30 years in business with the opening of a new service facility. Not surprisingly, service was a godsend for the family business during the Great Recession.

“That took us through the recession,” says Lyons, whose father, Rob, started the business. “People who relied on boat sales alone were way off. Some are no longer in business. For 30 years, we’ve worked very hard to build up our service business.”

The hard work paid off. Last year was the best the business has had since it opened three decades ago.

Spring has been late in the Northeast, too, but Lyons says lousy weather mostly limits walk-ins and impulse buyers, who usually return later in the year if they’re serious about buying.

Eastern and Seaway Boats also has seen no signs of a dip. “It’s been steady since the first of the year,” says Bruce Perkins, director of sales and marketing for the Milton, N.H., builder, which produces Down East boats from 18 to 35 feet. “I’ve got a lot of boats to build.”

Perkins says he has about 40 boats in the pipeline, some of which have yet to be started. “No slowing down that we’ve seen yet,” he told me.

What’s driving sales?

“We fit the niche,” Perkins says. “The boats are classic-looking. They’ve got good value. They’re fuel-efficient. And we’re still seeing a lot of people downsizing.”

Eastern Boats is continuing to expand. The builder recently acquired several models from Rosborough Boats, of Nova Scotia, which now will be marketed as Rosborough Boats USA.

Pent-up demand is also a factor, according to the boatbuilder. “I think people got fed up with waiting,” Perkins says. “They’re going to enjoy their lives. Our target audience — 50 to 70 years old — has the money. None of these [boats] are being financed.”

But Perkins also hasn’t forgotten the hard times. “We’re very fortunate,” he says. “We knock on wood every time we remember the last three or four years, when you’d do anything to sell a boat.”

Comments

One comment on “‘Spring swoon’ not in the forecast

  1. CaptA

    You can’t have it both ways. Either you cut government spending with the expectation the short and medium-term economy is going to take a hit or you don’t cut spending and let the chips fall where they may.

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