Industry leaders talk effects of possible recession on casual category – Casual News Now

After the pandemic struck in 2020, money was given to both people and businesses by the government to help keep the economy secure.

Where has that money been spent over the last two years, and how will that impact the economy if a recession does happen in 2023?

“Anytime you give people a bunch of money they are going to spend it,” says Wes Stewart of Sunset West. “Looking back at it, a result has been that because people couldn’t travel and many worked from home, they spent more on their homes. Not only do we benefit because of that, but also because more dollars flowed into people’s pockets. If you look across the board, it seems like all asset prices inflated. So it wasn’t just Sunset West — cars got more expensive, or dealers were able to charge a premium. There was money being thrown around and I think there were a lot of people that benefitted from it.”

As an economy as a whole, Stewart says he expects 2023 to be slower than 2022, but business will pick back up in 2024. 

“Housing prices spiked so high, so quickly and created so much of a wealth effect in the stock market that I think everyone noticed,” he explains. “And once they’ve felt it, it was like their retirements were up. They sold their house for more money than they ever thought they would, or they stayed put and their house payment dropped drastically because they locked in at sub 3%.”

Stewart also mentioned the velocity of money, which is the idea that money flows through the economy faster and in larger amounts, which in turn “makes people feel like there’s just more money around.”

“When you talk about the government spending and putting more money into the economy, well, that money was spent 10 times over,” Stewart says. “There’s almost a multiplier effect when money is introduced into the economy.”

However, Jay Weber, president of Pacific Casual, says the money from the government didn’t have a discernable effect on his business.

“People sell to the excitement of having that money and spending it, but that’s short term,” Weber says. “That’s what I think what we’re seeing now — consumers are looking at what they want to spend their money on based on flexibility now. They can go out and go on vacation, they can go out to restaurants. And so where they were stuck at home and fixed up their houses then, now that everybody has the flexibility again  they’re holding off and those types of things.”

In terms of an upcoming recession, he says consumers are going to lay back on purchases due to sticker shock. And that will be on everything from imported furniture to cars. 

“When the tariffs first came out, the retailers kind of absorbed a lot of it, we absorbed it as manufacturers, and consumer was largely unaffected,” Weber says. “And as it increased to 25%, then some of it was passed on in the form of higher retail prices. Then you go into 2022, with all of this astronomical cost of ocean freight to bring it in, and I think that’s just where retailers can’t hold them anymore.”

Weber also explains that freight prices are way down compared to what they were a year ago. The all-time high for a 40-foot container was $19,500, which Weber says was likely in April of this year. And today, you can book containers for under $2,000.

“What will be the new norm?” Weber asks. “Will they keep prices down so when we start shipping down another month or two our shipping picks up dramatically? Are they going to keep the rates reasonable? And then what is that new reasonable number?”

Bew White, CEO of Summer Classics, says he didn’t feel like this was going to be a major recession, but now he’s unsure. 

“The best thing you could do is go back and look at history in the 70s and 80s,” he explains. “I was in New York City during that time, and the stock market was terrible, though business was pretty good. But inflation continued. That caused people to overbuy, myself included, and now we’ve got to sell it off and correct all of this” 

He also says that Summer Classics has been trying to replace its fleet of cars, and dealers are charging $7,500 more for new cars than the sticker price. 

“But you still have all this money sloshing around out there and who has it in their pockets?” he says. “Our backlog is getting phased out fast and our order activity is terrible right now — down 30% in October. But I’m up 40% for the year compared to 2019. Our customers are telling us they’re loaded with inventory. And they got all this stuff that they bought last year just now coming in.”

If a recession hits, White says he doesn’t think people are going to know how to react, so being financially sound is key. 

However, Stewart says the outdoor industry is almost recession-proof, as people will always need to get new furniture eventually because the product is finite.

“The sun doesn’t care what the economy’s going to do, it’s going to fade fabric as fast as it wants to,” he says. “Outdoor is not like indoor dining tables that are purchased maybe one or twice by a household. Sure, they can push it off one season. But can they push it off three? I don’t think so.”