Inflation May Affect Growth in Pool Industry

Inflation jumped 7.5% year over year in the latest report released by the Labor Department on Thursday. Consumers saw the highest jump in prices since 1982 according to analysts. If you’re in the pool industry though you hardly needed to wait for the report to tell you what you’ve already known for some time; prices are going up.

Experts in the pool industry have already felt the results of inflation in the form of rising costs across the board on manufacturing, raw materials, and salaries. The jump in inflation numbers comes as no surprise to those who’ve seen an increase in demand for goods and services related to pools over the last two years

Gains have led to recordbreaking growth years for companies as consumers were ready to pay more for products. In the industry, most major manufacturers reported sharp upticks in revenue and growth; defying pundits who’ve been predicting a reversal coming.

During year one of the Covid-19 pandemic, the federal government provided financial assistance to individuals and businesses in the form of stimulus payments, increased unemployment benefits, and enacted the Paycheck Protection Program under the CARES Act.

These unprecedented efforts by the government likely spared millions from financial ruin, but the influx of all that cash has undeniably caused inflation rates to skyrocket.

Will Inflation Impact the ’22 Pool Season?

We reached out to folks on social media to get their take on what is going on and how they perceive it will impact their business.

“I’m already tightening the belt and doing what I can to do less for more money,” said Jonathan Evans of Sequoyah Pools, “we weathered the last recession well. We’re not a big company and aren’t posting record profits because we don’t gouge people.”

Pool contractor, Joe Lloyd has concerns about how inflation will impact the upcoming pool season this summer, “Definitely worried about this upcoming season price-wise,” said Lloyd, “None of us can afford to keep costs down for customers by eating them ourselves. We have to pass them along to them.”

“I look at my phone calls, and it is a dramatic difference from the last 2 years. There is definitely a decline in interest about to where it was,” said Brian Conners of River City Pool & Spa in Hixson, TN.

“It will absolutely affect me. Yeah I see the cost of goods going up, but the cost of any type of building supplies have gone up dramatically,” said Tampa pool professional – Jacob Schroth, “not only are the builders and remodelers dealing with the price increases there is a big inventory issue on all goods. I find myself going to 3 stores sometimes to get what I need.”

When inflation causes higher prices, the demand for credit increases, raising interest rates. While this is great for lenders, the reverse is true for consumers; particularly those of pool-related products.

Higher interest rates eventually will raise the cost for a wide spectrum of borrowing, from mortgages and credit cards to vehicle and business loans. Traditionally when this happens, we’ve seen less consumer confidence and a decrease in spending.

This jibes with what Ryan Johnson, Owner of Check It Out Pools in Sparks, NV thinks might occur. His concern is that rising interest rates will affect new home buyers who may have been considering a pool. “It will put off buyers in the market that are so close to homeownership that they are barely close to qualifying for something,” said Johnson, “a $400 increase in their house payment will hurt a lot of middle-class families to the point it’s not worth it. They definitely will think twice about installing a pool, getting service, or upgrading their pool or backyards.”

While the last two years, consumer confidence seems to have been at an all-time high for reinvesting in the backyard, many have serious reservations we will see a repeat this year in terms of demand. The current inflation outlook seems to be less optimistic that consumer interest will reach the levels seen in the previous two years and that the time for belt-tightening may finally have arrived.

Stock prices were down after the inflation report was released with the S&P now -5% for 2022 so far and all sector indexes reporting a decline. The Nasdaq was also down and is so far -11% for 2022 and poised for the worst start to the year since the 2008 financial crisis.

Stock prices for some of the largest publicly held pool manufacturers and distributors are also down substantially for the year. Latham Group (SWIM) grew by 56% to $630.5 million last year, 2022 paints a completely different picture from this year’s forecast. Year to date their stock is down -47.66%. PoolCorp (POOL), another significant publicly-traded company is down -25.41% YTD.

With inflation issues beginning to cause a diminishment in consumer confidence, it’s unlikely that this year will be a repeat of the explosive demand consumers saw in 2020 through the end of 2021.

While pool sales were up significantly over the past two years, many pool builders were unable to fully capitalize on the surge in demand due to issues with getting supplies and materials in a timely fashion.

A lack of available labor also became a major pain point for both builders and consumers as the Covid-19 pandemic progressed. Concerns this year are the following:

Inflation is rising and consumer confidence about buying a pool is decelerating.

Higher construction costs for building a swimming pool.

Resurgence in travel in tourism means less discretionary dollars spent on pools in ‘22-’23.

With the country finally getting back to a “business-as-usual” attitude after Omicron hit the media, many consumers finally have the option to travel again. After a two-year hiatus, one of the hardest-hit industries was travel and tourism. Expect a resurgence in this sector in 2022 through 2023 and the converse to hold true about new pool construction.

Consumer interest is cyclical in nature when it comes to demand for pools. The 2008 recession saw hundreds of pool companies fall casualty of the mortgage crisis. looking at another recession.

While there is still the ’22 pool season to look forward to and existing pentup demand from consumers who were unable to get a pool built — the number of homeowners seeking to build a pool from ‘23-’24 is expected to drop significantly. Consequently, this season could very well be a calm before the storm in terms of declining demand.

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