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- Recreational vehicle sales have consistently fallen in every month of 2019 compared to last year.
- Experts worry that the RV decline could be yet another sign that an economic recession is forthcoming.
- Last week, the "yield curve" between short- and long-term Treasury bond yields inverted for the first time in a decade. The change has preempted each of the last seven recessions.
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Forget the yield curve. Sales of recreational vehicles could be another ominous recession warning that’s now also flashing red.
RV shipments have come in below 2018 levels during each month of 2019 thus far, according to data from the RV Industry Association, totaling a 20% drop compared to last year, and experts say the decline could be a harbinger of more damning economic data to follow.
"The RV industry is better at calling recessions than economists are," Michael Hicks, a professor of economics at Ball State University, near the’ hearth of American RV production in Indiana, told The Wall Street Journal on Monday.
Complicating matters, however, is the impact from President Donald Trump’s ongoing trade skirmish with China. While a vast majority of RV’s are manufactured in the Heartland, those same manufacturers — like Thor Industries, Winnebago, and LCI Industries — rely heavily on imports from foreign countries.
Many of those constituent products, are included in the Treasury’s latest list of some $300 billion worth of products that are no subject to tariffs, which must be paid by the importer. Those costs are often passed through to consumers, and have already wreaked havoc upon the American RV industry.
This week, the White House opted to delay new tariffs on some Chinese imports to December 15 from the originally planned September 1 date.
"While the threat of additional tariffs related to products imported from Mexico has passed," Winnebago’s CEO, Michael Happe, told analysts earlier this month, "a trade war with China appears to be more lasting."
Investors, for their part, seem to echo Happe’s fears that the trade war is here to stay.
Last week, the spread between two- and 10-year US Treasury bond yields fell below zero, something that’s preceded each of the last seven recessions. That flocking of capital to shorter-term notes sent shockwaves through financial markets, causing one of the largest single-day equity selloffs in recent years.
"Such inversions have had a good track record of calling recessions—and now equity investors are listening," Lisa Shalett, chief investment officer of Morgan Stanley’s wealth management division, said Monday. "Gold, currencies, commodities and other rate-sensitive assets are also signaling recession. Second quarter S&P 500 earnings show negative year-over-year growth for the second consecutive quarter, which constitutes an earnings recession."
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