The Motorcycle Index: Are Bike Sales a Sign the Economy Is Revving Up?

Motorcycle index
For the most part, recent economic news has been filled with doom and gloom. Unemployment remains high, consumer confidence remains low, and unqualified good news is hard to come by. However, one recent indicator provides some cause for optimism: Motorcycle sales have revved up to a roaring recovery, and reached their highest level since before the recession.

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Sales at motorcycle and all-terrain vehicle dealers have surged by almost 16% over the past year, surpassing the 15.9% growth rate high they hit in 2004, according to data recently released by Sageworks, a financial information company. During the same period, their profits have also gone up steeply -- from about 0.64% in 2009 to 2.55%, almost a four-fold increase.

While the recession can be blamed for some of the slowdown in the motorcycle market -- in 2009, sales fell by 13.77% -- sales had been falling steadily since 2004. Robb Granado, an analyst with Sageworks, offers several possible reasons for the recent comeback. Part, he argues, can be credited to a snap-back from the recession, when tough times kept people from buying bikes and low sales kept dealers from replenishing inventory. But the post-2010 growth, which is still continuing, is hard to explain.

sales of motorcycles

One clue might be the fact that, while gas costs are dropping, they still remain high. Motorcycles are far more fuel efficient than cars -- even Harley Davidson bikes, notorious for their high gas consumption, get between 44 and 59 miles per gallon on the highway. More efficient brands like Kawasaki and Yamaha often do much better, and commuters looking for cost-effective transportation may find that a new motorcycle can quickly pay for itself.

Another factor, Granado notes, may have been the surprisingly temperate 2012 winter. For many riders, motorcycles are a seasonal option, and often get parked in the garage when the weather gets rough. If last winter was any indication, motorcycle season may be getting longer ... further extending the possible savings on gas.

"Sure Thing" Investing Theories Put to the Test
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The Motorcycle Index: Are Bike Sales a Sign the Economy Is Revving Up?

Gallery by Rich Smith, The Motley Fool

Right now, it looks like "sell in May" was pretty sound advice. But in fact, stock markets experienced an even sharper, faster, deeper dive in early April than they did in early May. The difference was that in April, prices rebounded by month's end, and then fell off the cliff a second time in May. But really, 99% of the market's gains were already "in the bank" by mid-March. There was nothing black-magical about May at all.

The so-called "Superbowl" theory is a popular one in amateur stock picking. According to stock market lore, a year in which a team from the old National Football Conference beats a team from the American Football Conference will be a good year for the stock market. This should have been good news for 2012's stock market, since the NFC Giants beat the AFC Pats. Obviously, the jury's still out on this one, but so far, the market hasn't given investors a touchdown yet.

Sports fans of a different stripe may prefer to peruse the SI theory. When an American graces the cover of SI's most popular issue, it supposedly means good news for the S&P. This year, Kate Upton was the chosen beauty, and she's sure enough American (born in Michigan). But let's not count on her to charm markets upward just yet.

Not all investors waited for the January results to come in, the whistle to blow on the Giants' victory, or the May score on the Dow, before deciding that 2012 was going to be a great year. This is "the year of the dragon" in China, and according to The Economist, "dragon" years have historically been the second-best performers of the 12 Chinese zodiac signs, producing about 11% nominal returns. So far, though, we had little to show for it -- at least until the big rally over the past couple of days.

Speaking of rash decisions, we alluded to this indicator in a story on the startling rise in cases of diaper rash spreading across the country in 2011, alongside increased sales of Desitin and dropping sales of disposable diapers. In theory, such signs of consumer belt-tightening should portend a stinky performance by the stock market. So far, this is looking like a pretty good guideline.

Now we come to what has actually turned out to be perhaps the best oddball indicator of all. Nearly a century ago, economist George Taylor touted the his theory connecting the length of women's skirt styles to America's economic fortunes. (The higher the hemline, the higher the stock market.)

Believe it or not, in February, Business Insider conducted an exhaustive report on the status of New York hemlines -- no, seriously! -- concluding that "overall, average hemlines in 2012 registered a 44.38 on the index, up from 35.04 for the Fall/Winter 2011 collections."

One week later, USA TODAY argued the opposite -- that hemlines at the New York Fashion Week were really down -- concluding we were in for "a mild slowdown." And just to make things interesting, self-proclaimed "trend forecast analyst" Harilein Sabarwal argued in April that what's really in fashion this year are asymmetrical hemlines that start higher, and slant downward.

Hey -- maybe this is the most accurate indicator of all!

Regardless of the reasons why, things are looking bright for motorcycle manufacturers: Harley Davidson's stock (HOG) has worked its way out of the hole it fell into in 2009, and the company reported that retail sales grew more than 25% in the last quarter. Other manufacturers have also announced steep sales growth.

Whether the recent motorcycle sales jump is just a summer fling or the start of a period of sustained growth in fuel-efficient vehicles, one thing is certain: For now at least, bike manufacturers are stepping on the gas.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at, or follow him on Twitter at@bruce1971.
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