Boating Industry Slump Could Signal Recession Economists looking for signs of a recession might want to keep an eye on recreational boating, a $40 billion a year industry that has proved in the past to be a bellwether for the rest of the economy.

Boating Industry Slump Could Signal Recession

Boating Industry Slump Could Signal Recession

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Economists looking for signals of a recession might want to keep an eye on recreational boating, a $40 billion a year industry that in the past has proved to be a bellwether for the rest of the economy.

Boat sales in Annapolis, Md., a renowned center for sailing, have hit a dry spot in recent months, with the subprime mortgage crisis and sagging consumer confidence being singled out as culprits.

Yacht broker Dave Van den Arend said he has seen a lot more "skittish" buyers who are expressing reluctance to sink money into a boat just as the economy is looking unstable.

"The people who are looking are being more cautious about it, thinking more what they're doing," Van den Arend said. "There's a lot more buyer's remorse … where they get involved in the process and they regret it and they walk away from it."

Brunswick Corp. makes such well-known powerboat lines as SeaRay and Boston Whaler, as well as Mercury outboards. Brunswick CEO Dustan McCoy said his company's segment of the market is experiencing its worst slump in decades.

He said recreational boating, which led the economy down in the recessions of the 1980s, is "one of the first industries to begin to go down as the economy begins to stiffen."

McCoy points out that three-quarters of the nation's 13 million boat owners have annual incomes of less than $100,000. Those middle-class boaters are feeling the brunt of the home mortgage crisis, especially in key coastal states such as Maryland, Florida and California.

Thom Dammrich, president of the National Marine Manufacturers Association, said people often take out home-equity loans to finance their dream boat, but many of them started backing away from the market two years ago. That sent sales down 6 percent in 2006; the industry is forecasting as much as a 15 percent drop in 2007.

The mortgage crisis isn't the industry's only concern. It is also exposed to the high cost of oil and raw materials. Dammrich said the current downturn threatens American jobs as well. Although cheap labor has meant more boats made in places like Asia, boat building is one of the few industries that has weathered the outsourcing storm.

"Boats are manufactured in the United States, the components that go into boats are manufactured in the United States and the boating industry employs a lot of Americans," Dammrich said.

In downtown Annapolis, docks jut right into the heart of the city. Next to the waterfront is Fawcett Boat Supplies, which caters mainly to the area's numerous sailors, a major source of revenue for the town that is also home to the U.S. Naval Academy. And the town is already feeling the pinch.

"Everything in our industry is disposable income," said Fawcett co-owner Steve Ripley. "It's a luxury. You don't have to go sailing – some people feel like they do – but in reality, they don't."

He said people who decide not to buy a new boat typically spend money keeping up their old one. That's helped somewhat, because they buy a lot of the things that Fawcett sells, such as new winches and fancy GPS units.

Another thing keeping U.S. boat makers afloat in this time of trouble is the overseas market. The weak dollar has attracted an increasing number of Europeans who see boats "Made in America" as a real bargain.