Recreational Vehicle Sales As Recession Indicator

Some casual observers have noted the predictive power of recreational vehicle (RV) sales. Over the past six months of reported data, five have shown lower sales than the corresponding months in 2017.

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Figure 1: Total monthly RV shipments vs. last year. Source: RVIA.

A longer-term perspective yields some insight into the predictive power of RV sales.

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Figure 2: Year on year growth rate of total recreational vehicle shipments (blue), and year-to-date for 2018 (light blue). NBER defined recession dates shaded gray. Source: RVIA, NBER, and author’s calculations.

2018 YTD (October) change is -1.1%.

In general, negative observations are followed in the subsequent year by a recession, with the following false positives: 1986, 1996. Further, in 2007, the indicator signaled a recession in 2008, when the NBER dated the recession as beginning in December of 2007.

Dating the recession start in January 2008, and running the probit regression yields the following estimates, and fitted probabilities.

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Using this equation and forecasting out to 2019 assuming the decline in 2018 is the observed YTD decline relative to 2017, I obtain the following predicted recession probabilities.

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Figure 3: Predicted probabilities using probit regression, 2018 value of the independent variable is YTD relative to 2017 YTD (October). 20% threshold captures all recession dates, with one false positive in 1986. Source: Author’s calculations.

The predicted 11% probability of recession for 2019 is based on the -1.1% RV shipment growth recorded YTD (October 2018) relative to YTD (2017). Should the 2018 YOY change be more negative, the corresponding estimated probability of recession will be higher.

Disclosure: None.

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