March HIRI/IHS Global Insight forecast grew 4.2% in 2013, Expecting 6.5% sales growth in 2014

We estimate that in 2013 the Professional Market sales increased 3.4% last year; Consumer Market sales were up 4.5%; and total home improvement product sales rose 4.2% to $290 billion.

We continue to expect home improvement product sales growth to accelerate over the next two years.  We expect total home improvement product sales to increase by 6.5% in 2014 to $309 billion.

The National Economic Outlook

·         The acceleration in GDP growth that began in the third quarter of 2013 continued in earnest during the fourth quarter despite a large shutdown/sequester drag from the federal government.  Strong exports and consumer spending on services more than offset this drag, boosting full-year GDP growth to 1.9%.

·         Despite mixed economic data on jobs, housing, and manufacturing recently, we continue to expect the pace of GDP growth to pick up over the next two years, to 2.7% in 2014 and 3.3% in 2015. 

·         The pace of existing home sales slowed in the fall, following the run-up in mortgage rates, but sales were still up 8.9% for the year.  We expect continued growth in existing home sales in 2014, but we have revised our forecast down to show a 4.4% gain.  Housing starts are expected to increase 22% in 2014.  The growth of both of these housing market indicators will accelerate in 2015.

·         Consumer spending will return to a trend growth rate of about 3% over the next two years based on good, but not great, employment growth, rising confidence, and improved household balance sheets.

·         The outlook for consumer price inflation remains benign.  After increasing by 1.5% in 2013, we expect the CPI to rise by only 1.3% in 2014 and 1.7% in 2015.

Outlook for the Home Improvement Products Market

·         The latest Census Bureau data on spending on residential improvements suggest that Professional Market sales of home improvement products did not match the mid-year spurt in retail Building Material Dealers’ sales in 2013.  We estimate that Professional Market sales increased 3.4% last year; Consumer Market sales were up 4.5%; and total home improvement product sales rose 4.2% to $290 billion.

·         We continue to expect home improvement product sales growth to accelerate over the next two years.  Although existing home sales will grow more slowly in 2014, the pace of housing starts will improve and real income growth will be much stronger.  We expect total home improvement product sales to increase by 6.5% in 2014 to $309 billion.

·         Housing starts, existing home sales, and real income growth will all show further improvement in 2015, and we expect total home improvement product sales to increase 7.0% in 2015.

·         Home improvement product sales growth will then slow over the following three years as the housing market cycle runs its course.  Sales growth will average 4.6% annually over the period 2016-2018. 

Growth rates of market size by segment for 5-year historical and forecast periods are as follows: