By Marilyn Odendahl, Truth Staff
modendahl@etruth.com
SOUTH BEND -- Local wisdom holds that the recreational vehicle industry is the first to recover from a recession, but one university economist believes this time could be different.
The drastic loss of personal wealth coupled with the expectation that the tight credit market will continue leads Grant Black to predict RVs will not bounce back as quickly from this economic downturn.
"I don't think that's going away," he said. "Even with the stabilization in the markets, I think you're going to see a lot tighter credit than you did a year ago or two years ago."
Black, the director of the Bureau of Business and Economic Research at Indiana University South Bend, was among the IU economists at the IU Kelley School of Business 2008 Business Outlook Panel.
The panel predicted the economic decline would extend through the first half of 2009 but by the fourth quarter the economy will be improving. However, that improvement probably will not have factories pumping out products and consumers spending freely.
Instead, by the fourth quarter the American economy will have returned to the level it is today, explained Morton Marcus, director emeritus of the Indiana Business Research Center at IU.
"Tough times are here and tough times are ahead," Black said.
Although gas prices, which initially tripped up the RV industry, have dropped to below $2 a gallon, shipments are falling to record levels, in part, because buyers are having great difficulty getting financing.
"The banks are tighter than a frog's rear end," said Rob Reid, president and owner of Great Lakes RV Center in Elkhart. "I am mad at our local banks here because they don't want to help. They're pulling back rather than helping out."
As an example of how tight the credit market has become, Reid pointed to one customer who had a solid credit score of 710 and wanted to borrow $54,000 but got rejected by the bank in October. In March, that same customer would have slid through with an automatic approval.
"I was baffled," Reid said. "In fact, I yelled at the banker, 'This is ridiculous.'"
With the concentration of manufacturing, the Northern Indiana region was hurt by the recession but Elkhart County has fared worse because of the "massive slowdown" in the RV industry, Black said.
The indicators of the economic conditions include:
* Of the 8,800 jobs the region lost through September, Elkhart dropped the most at 5,300.
* The average weekly wage in Elkhart has stagnated at $702 for the past couple of years.
* The number of households in Elkhart receiving food stamps has risen 27 percent to 8,700 from August 2007 to August 2008.
Local banks are not giving any signal of when they will start lending again, but Reid anticipates bankers will keep a tight hold on the money for another six months. As for when the RV industry will rebound, he was not so sure.
An estimated 150 business professionals attended the breakfast event at Saint Mary's College, which was presented by the Northern Indiana Workforce Board.