I read that the drop of sales in the RV market could signal the possibility of a recession. How?
Question/Comment: I read that the drop of sales in the RV market could signal the possibility of a recession. How?
Paul Solman: At the simplest level, a drop in the sales of anything could signal a recession. RVs = leisure purchases. If Americans are becoming afraid to make such purchases, then maybe that’s a sign they’ll cut back on much of their spending. Since consumer spending represents some 70 percent of the whole economy, a cutback would slow factory orders, hotel and airplane bookings, etc.
Those cutbacks would force the companies in question to hire fewer workers, perhaps fire some or, to cite the above question about Harley-Davidson, grant a whole lot of unpaid leave.
If there are fewer workers or, at the very least fewer hours worked, those workers will then have less to spend on RVs, hotels, airplanes, whatever. Then there would be less business overall. Eventually, the economy contracts – fewer goods and services sold than in the previous quarter of a year. When the economy contracts for two successive quarters, that’s called a “recession.”