Latest / Stagflation Conversations with Fexingo: High Inflation, Slow Growth, and 1970s Echoes / How Stagflation Is Reshaping the Golf Industry
Transcript
- Lucas: If you think stagflation only hits the obvious sectors—housing, cars, fast food—I've got one that might surprise you. The golf industry is getting squeezed from both sides right now, and the data tells a really clear story. Luna: Golf? I mean, I know rounds played have been sliding for years, but is stagflation actually accelerating it? Lucas: It is. And it's not just about rounds. Let's start with what we know from the National Golf Foundation. In the first five months of 2026, total rounds played are down about 8 percent compared to the same period last year. That's a bigger drop than we saw in 2023 or 2024. Luna: Eight percent is significant. And we're coming off May CPI numbers that showed core inflation at 3.4 percent—the highest since October 2023. People are feeling that pinch. Lucas: Exactly. The Fed's preferred gauge—the core PCE price index—hit 130.1 in May, up from 129.67 in April. Those tenths of a point add up. And for a sport that's already seen participation plateau, higher costs for everything from greens fees to gas for the cart are pushing casual players out. Luna: So it's a classic stagflation dynamic: costs keep rising, but wages aren't keeping pace. Average hourly earnings are at $37.50—up, but not enough to cover a $60 weekend round at a mid-tier public course. Lucas: Right. And the operating costs for courses themselves are spiking. Water bills alone—especially in drought-prone states like California and Arizona—are up something like 22 percent since 2024. Fertilizer, labor, insurance—all climbing. That forces courses to either raise prices or cut maintenance, and neither option is great for retaining players. Luna: We're already seeing course closures tick up. I read that in 2025, the net loss of courses in the U.S. was about 60, and 2026 is on pace to be worse. Lucas: Yeah, the trend has been negative for a decade, but the pace is accelerating. But here's where it gets interesting—there's a bifurcation happening. The high-end private clubs and luxury golf resorts are actually booming. Luna: I've noticed that. Initiation fees at top-tier clubs in places like Florida and the Northeast have jumped 15 to 20 percent in the last two years. Waiting lists are longer than ever. Lucas: That's the stagflation wealth effect in action. Low unemployment—still at 4.3 percent—means the top quintile of earners is doing fine. They have money, and they're parking it in experiences and assets that feel durable. A country club membership is both. Luna: So the rich are getting richer and playing more golf, while the middle class is cutting back. That's not a healthy dynamic for the sport long-term. Lucas: No, it's not. And it's showing up in equipment sales too. Callaway and Titleist both reported softer than expected Q2 revenue. The mass-market consumer is trading down—buying used clubs, skipping the $600 driver upgrade. But the premium segment—custom fittings, limited-edition putters—is still growing. Luna: So it's a luxury good now. Golf was already expensive, but stagflation is hardening that line. Lucas: Exactly. And if we zoom out to the macro picture, the real GDP growth annualized was just 2.1 percent in Q1 2026, recovering from a near-zero 0.5 percent the quarter before. So growth is modest, inflation is sticky, and the sectors that depend on discretionary middle-class spending—like public golf—are caught in the middle. Luna: What about golf travel? That seems like another split. I saw that bookings for high-end golf resorts in Scotland and Ireland are up, but domestic weekend trips are down. Lucas: Bingo. St. Andrews and Pebble Beach are doing fine. But the average municipal course in Ohio or Michigan is struggling to fill tee times on Tuesday mornings. The industry is essentially becoming two separate markets. Luna: And that's the kind of structural shift that doesn't reverse when inflation cools. Once a course closes, it's gone. Lucas: Right. And if today's conversation gave you a new lens on how inflation and slow growth are reshaping an industry you might not have thought about, that's exactly what this show is for. The way we keep these episodes ad-free and focused is through listener support. If you found it useful, you can head to buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small way to make sure we keep digging into these angles. And honestly, it helps us stay independent. Lucas: So back to golf—one thing I'm watching is whether the equipment makers start consolidating. If the mass market continues to shrink, brands like Callaway might acquire smaller direct to consumer players to capture that premium niche. Luna: That would mirror what we've seen in other industries during stagflation—the strong eat the weak. And it would change the competitive landscape for years. Lucas: Exactly. So the takeaway here is that stagflation isn't a uniform force. It hits different parts of the same industry in opposite ways. For golf, the divide between the luxury experience and the everyday game is widening fast. And that's a story worth following through the rest of 2026. Luna: Agreed. And on that note, we'll be back next week with another angle you won't see on the evening news.