From time to time, GNN will serve up a story on the overall Canadian economy, which may not be golf industry specific, but does have a direct effect on the golf business, just as it does with any other industry.
GNN blogger Kyle German touched on that very topic last week in this contribution. Kyle says that low interest rates have allowed young people who might never have owned a home in years gone by to get into the housing market.
With the cost of housing and upkeep of the home, that is likely taking a lot of disposable income away from generation that is expected to replace the baby boomers in golf.
On the plus side, he says many of those indebted young people may be a little more comfortable financially as time goes on, say in 10 years or so, and take up golf as their disposable income grows.
There are some concerning caveats to that theory, one being the possibility of a slowdown in a country that, to this point, has escaped the economic pain that many other countries have felt in recent years.
Bank of Canada Governor Mark Carney, who will take the same position with the Bank of England later this year, has downgraded the forecast for Canadian economic growth for 2013. Recent disappointing job reports, falling commodity prices and weak exports could set us up for problems.
If that does happen, we must consider how the job market will be affected through layoffs or the trend towards outsourcing, meaning lower-paying jobs with no benefits or pensions. That means disposable income gets stretched even thinner.
Adding to the problem is that, despite repeated warnings, Canadians are increasing their debt load with the low interest rates. The average Canadian household debt has risen to 165 per cent of the average household income.
Canadians are now among the most indebted peopled in the world and if that trend continues, higher interest rates are likely on the way, which might cool the temptation to borrow, but compound the problem when people go to renew mortgages, etc.
The wild card in all of this is what higher interest rates could do to an already-softening home market.
While most predict a soft landing for housing, the possibility of a burst bubble is not inconceivable, so the next generation of core golfers could face a situation where their original investment actually goes down in price.
There are a lot of “ifs” to consider and it’s difficult at this point to estimate if some will be factors and, if so, to what degree they will be factors, but we should have a clearer picture by the end of the year.
Economic conditions can change quickly and slowdowns are temporary situations, but consideration needs to be given to the lingering effects that all of this might have.
Indebted young people may yet become the core golfers of the future, but depending what happens in the next year or so, you wonder how long it will take for them to come to the game and how often they’ll play if disposable income is still squeezed by other responsibilities.