CONSUMER CONFIDENCE?

What To Expect In The Second Half Of 2023

Is our industry gas tank half full... or are we on the verge of running on fumes?

The newest consumer confidence and consumer sentiment numbers are out – and they are strikingly good considering the circumstances. Consumer attitudes about the economy and about their own financial prospects have been all over the place this past year, but the latest numbers might prove to be the turning point we have been waiting for. U.S. consumer confidence (as measured by the Conference Board) increased in June to its highest level in a year-and-ahalf, to 109.7. That is the highest reading since January 2022 when we were finally coming out of the worst of COVID and consumer confidence was rebounding. Likewise, the University of Michigan’s consumer sentiment survey for June rose 9%. The survey reported an even stronger rise (11%) in expectations for the future.

That is great news because when consumer confidence is high, Americans spend more. And since consumer spending makes up a whopping 70% of GDP (GDP is Gross Domestic Product – the leading measure of the nation’s economic output), strong consumer confidence bodes well for the rest of the year, believe it or not.

Consumers under 35 and those earning incomes over $35,000 expressed the most confidence, both in today’s

Consumers expect fair winds ahead and, if history is any guide, we can expect consumer spending to remain strong through the second half of the year. That is good news for the powersports industry in general and in particular for you as a Dealer… right?

Economists are a bit less sanguine than the average consumer. They have a more “tank is half empty” view of the next six months. The Conference Board’s economists believe that weaknesses in some parts of the economy will intensify and spread over the coming months, leading to a recession. They point to persistent inflation, Federal Reserve cautiousness (continuing to push up interest rates although they paused most recently), dampened bank lending, reduced federal government spending due to the recent debt ceiling deal, and the lack of robust business investment. They forecast that real GDP growth will slow to just one percent (1.0) in 2023 and then fall to zero percent (0.0) in 2024.

While consumers say they intend to keep spending, some economists are skeptical. They contend that persistence in consumer spending is about to end because it is ‘artificial.’ That is, the two factors that have been driving strong consumer spending are beginning to fade. First, some economists argue, consumers have been spending the savings they accumulated during the pandemic and those funds are about to be depleted. Second, consumers have been doing a lot of ‘revenge spending’ and that, too, is about to end.

The pandemic disrupted Americans’ travel plans and when the pandemic ended, Americans took revenge by making up for lost time. They took to the sky and headed out in their cars and RVs in record numbers. However, the new Conference Board numbers suggest that fewer Americans are planning to travel in the upcoming months (versus the same time period in 2022 and in pre-pandemic years), thus signaling the end of ‘revenge spending.’

Other economists, however, are a bit more bullish. They cite falling inflation numbers, strong labor market conditions –the strongest in decades, falling unemployment rates and improved job satisfaction as proof that the economy is strong and thriving. In their view, there is no recession on the horizon.

Big Picture

Consumers are optimistic about the future. They have jobs, are making decent wages, and are living the life they want to live. Despite persistent forecasts of a recession, they continue to buy the things they want and need. For Powersports dealers, that means you can expect your customers to continue to buy. They may not be in the market for a brand-new bike – this is not 2020 all over again – but they will continue to support their passion for powersports.

If the Federal Reserve pushes interest rates higher – central bankers expect to raise their policy rates two more times in 2023 (The New York Times, June 30, 2023, p. B4) -- the higher rates will eventually take a toll on consumer spending and slow the economy. At that point, you will see a slowdown as well.

However, until that day comes, you can expect your customers to be interested in new and innovative products, interested in customizing the products they own, and excited to support the events you sponsor. In other words, you can expect a stable market full of opportunities to grow your dealership.

A perennial keynote speaker for the Motorcycle Industry Council’s annual Communications Symposium, Dr. Paul Leinberger has become the powersports industry’s de facto futurist/strategist. Dr. Leinberger is an expert in market/brand strategy and research with more than two decades of social trend forecasting, market strategy and strategic planning. Prior to joining TTD, he was Senior VP of GfK NOP, where he ran the company’s flagship consumer trend services, Roper Reports, as well as the company’s groundbreaking Global Visual Database. His client list reads like a Who’s Who of corporate America: Hewlett-Packard, Apple, Disney, Nordstrom, Microsoft, Levi Strauss, E.& J. Gallo Winery and Toyota, among many others. Prior to his global responsibilities at GfK NOP, Dr. Leinberger was the Corporate Manager in the Product Planning and Market Strategy department at Nissan North America. Dr. Leinberger holds a Ph.D. in organizational and social psychology and a Masters of Urban Planning (Highest Honors). He lives in Irvine, California, and his latest book is available at: www.amazon.com/Unfiltered-Marketing-Credibility-Customers-Distracted/dp/1632651785