Floor Covering Weekly July 22, 2013 : Page 1

Vol. 62 No. 14 A Hearst Business Publication July 22, 2013 $75 F LOOR C OVERING W EEKLY The Industry’s Business News & Information Resource Harvard University’s Joint Center for Housing Studies Kermit Baker Key findings: 18 Stability, increase comes from residential replacement, builder markets STATISTICAL REPORT ’12 Chart 1 In 2012, U.S. oor coverings sales experi-are estimated to have increased closer to 10.6 enced its strongest growth since the start of percent in 2012. Builder purchases lagged the Great Recession, according to the Cata-starts since the upturn in builder activity was lina Research report. Manufacturer dollar centered in the multi-family sector. Since a sales (shipments minus exports plus imports) new multi-family unit is less than one-half are estimated to have increased by 4.8 percent the average size of a new single-family home, the increase in square in 2012 to $18.76 billion. footage constructed by Volume sales could have builders increased by only risen by 2.6 percent to 18.1 9.8 percent in 2012. is billion square feet. News ................................... 3 increase pushed builder In comparison, growth 2012 Industry Statistics ...... 4 purchases to account for of dollar sales in 2011 was an estimated 7.7 percent posted at 2.5 percent while marketWise ......................... 5 of total U.S. oor cover-square foot sales dipped Imports/Exports .................. 7 ings dollar sales. is is up that year by 1.5 percent. Wood ................................... 8 from 7.3 percent in 2011, Gains in 2012 re ect Tile & Stone ...................... 12 but remains below the sharp increases in the builder Resilient ............................ 19 14 percent share seen in market and a strengthening Laminate ........................... 22 2007, reported Catalina. residential replacement e key residential market. Meanwhile, growth Carpet & Area Rugs ........... 28 replacement market is in nonresidential markets The Last Word .................... 30 estimated to have increased slowed due to the decline in public building construction spending keeping in importance over this period. In 2012, resi-the recovery in oor coverings sales below long dential replacement purchases are estimated to term growth rates, reported Catalina. Histori-account for 56.5 percent of total oor coverings cally, oor coverings sales growth in dollars has dollar sales. is is up from 53.4 percent in been more than 5 percent annually and square 2007. Residential replacement dollar sales are foot sales gained about 4 percent per year. estimated to have increased by 4.9 percent in Below average industry gains over the current 2012. is was close to the industry average and recovery period kept 2012 square foot sales up from a 2.7 percent gain in 2011. Stronger growth was due to an increase in existing home some 35 percent below record 2005 levels. e builder market saw a signi cant sales and an increase in existing home prices. rebound in 2012 due to a 28.2 percent gain in Existing home turnover stimulates home buyer housing starts. e surge in starts re ected low remodeling projects, while rising home prices interest rates, rising consumer con dence, give non-moving homeowners con dence to and the low inventory of new and existing invest in their home. Continued on page 4 homes for sale. Sales to builders, however, 2012 U.S. Floor Covering Sales: $18.76 billion (in wholesale dollars) 4.8% 10.4% 12.5% Laminate Hardwood Ceramic Floor & Wall Tile Stone Vinyl Sheet & Floor Tile $908.2 million 1.6% from 2011 On the inside $1.96 billion 7.2 from 2011 $2.35 billion 6.2% from 2011 5.9% 12.6% $1.11 billion 4.3% from 2011 $2.36 billion 11.8% from 2011 $307.4 million 1.6% 52.1% Other Resilient Carpet & Area Rug 8.9% from 2011 (Cork, rubber, other plastics and linoleum) $9.76 billion 2.7% from 2011 P e r i o d i c a l UP 4.8% For breaking news updated each business day, visit us online at www.fcw1.com Source: Catalina Research from 2011

STATISTICAL REPORT ’12

Stability, increase comes from residential replacement, builder markets

In 2012, U.S. floor coverings sales experienced its strongest growth since the start of the Great Recession, according to the Catalina Research report. Manufacturer dollar sales (shipments minus exports plus imports) are estimated to have increased by 4.8 percent in 2012 to $18.76 billion. Volume sales could have risen by 2.6 percent to 18.1 billion square feet.

In comparison, growth of dollar sales in 2011 was posted at 2.5 percent while square foot sales dipped that year by 1.5 percent.

Gains in 2012 reflect sharp increases in the builder market and a strengthening residential replacement market. Meanwhile, growth in nonresidential markets slowed due to the decline in public building construction spending keeping the recovery in floor coverings sales below long term growth rates, reported Catalina. Historically, floor coverings sales growth in dollars has been more than 5 percent annually and square foot sales gained about 4 percent per year. Below average industry gains over the current recovery period kept 2012 square foot sales some 35 percent below record 2005 levels.

the builder market saw a significant rebound in 2012 due to a 28.2 percent gain in housing starts. the surge in starts reflected low interest rates, rising consumer confidence, and the low inventory of new and existing homes for sale. Sales to builders, however, are estimated to have increased closer to 10.6 percent in 2012. Builder purchases lagged starts since the upturn in builder activity was centered in the multi-family sector. Since a new multi-family unit is less than one-half the average size of a new single-family home, the increase in square footage constructed by builders increased by only 9.8 percent in 2012. this increase pushed builder purchases to account for an estimated 7.7 percent of total U.S. floor coverings dollar sales. this is up from 7.3 percent in 2011, but remains below the 14 percent share seen in 2007, reported Catalina.

the key residential replacement market is estimated to have increased in importance over this period. In 2012, residential replacement purchases are estimated to account for 56.5 percent of total floor coverings dollar sales. this is up from 53.4 percent in 2007. Residential replacement dollar sales are estimated to have increased by 4.9 percent in 2012. this was close to the industry average and up from a 2.7 percent gain in 2011. Stronger growth was due to an increase in existing home sales and an increase in existing home prices. Existing home turnover stimulates home buyer remodeling projects, while rising home prices give non-moving homeowners confidence to invest in their home.

Residential replacement sales were stimulated by a 9.4 percent increase in existing home sales as interest rates hit record lows. This is important, said Catalina, as some 28 percent of buyers of an existing home undertake some type of flooring replacement job in the first year of ownership. In addition, existing home prices turned positive in 2012, rising some 6.4 percent. file growth in the important residential replacement market could have been stronger if not for the sluggish gains in employment and personal income.

In 2012, nonresidential market gains lagged behind those made in the residential market after outpacing overall flooring demand during the recession. Nonresidential floor coverings dollar purchases are estimated to have increased by 3.4 percent in 2012 compared to a 5.5 percent gain for residential markets. this pushed nonresidential share down to an estimated 31.1 percent in 2012 from 31.5 percent the previous year. However, nonresidential share remains above the 27.6 percent level seen in 2007.

Nonresidential market growth was adversely affected by the decline in public construction spending in 2012, which declined by 5.6 percent versus a 12.6 percent gain in private nonresidential building construction spending. Public building construction spending declined as budgets were cut at all levels of government as the Federal government attempted to cut its fiscal deficit. On the other hand, selling opportunities increased in the hospitality, corporate office and retail markets.

In 2012, hard surface flooring is estimated to have accounted for 47.9 percent of total dollar industry sales and 43.6 percent of total square foot sales. this is up from 46.9 percent and 42 percent, respectively, in 2011. In 2002, hard surface flooring represented only 39.4 percent of total dollar sales and 29.9 percent of total square foot sales. Manufacturer hard surface flooring sales are estimated to have increased by 7.2 percent in dollars and 6.4 percent in square feet in 2012. Carpet and rug sales rose by only 2.7 percent in dollars and could have declined by 0.2 percent in square feet.

In 2012, hard surface product growth outpaced the growth of soft-surfaces because hard surface flooring increased its price competitiveness and hard surface flooring products are much more dependent on the strong growing builder market. In addition, consumers have significantly increased their preference for hard surface flooring in non-bedroom areas of their homes. This has caused demand for wall-to-wall carpet to decline sharply. Meanwhile, area rug sales continue to grow as consumers purchase area rugs to accent their new installations of ceramic tile, vinyl sheet and floor tile and wood flooring, the sharpest growing sectors of the U.S. floor coverings market.

Read the full article at http://bt.e-ditionsbyfry.com/article/STATISTICAL+REPORT+%E2%80%9912/1457943/167931/article.html.

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