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March 2013 Home Improvement Market Sales Forecast increased
5.4% in 2012 with slightly slower growth of 4.3% in 2013

The March, 2013 IHS Global Insight/HIRI Home Improvement Products Market Forecast for 2012 total home improvement product sales is slightly ahead of our September 2012 forecast at +5.4% to $275.6 billion.

Our product sales growth forecast in 2013 is little changed from our September report. We expect slower growth of the home improvement product market in nominal dollars, with total sales increasing 4.3% to $287.3 billion.

We expect stronger growth of home improvement sales averaging 5.9% in 2014-2015 with a deceleration in the following two years as the housing market cycle runs its course.

The National Economic Outlook

· Recent news on the economy has mostly been upbeat, but threats to growth remain, and expiration of the 2 percent cut in payroll taxes at the beginning of the year means slower growth of disposable income. We continue to expect a slight slowdown in growth this year – with real GDP up 1.9 percent compared to the 2.2 percent increase reported for 2012.

· Consumers will respond to the cut in their take-home pay in part by reducing saving. A drop in the saving rate from 3.9 percent in 2012 to 2.7 percent in 2013 will help to mitigate the effect on spending of higher taxes. We expect real consumer spending growth of 1.9 percent in 2013 – matching last year’s pace.

· The housing market will continue on the upward trend established in 2012. However, we do not see further acceleration from last year’s growth rates. Existing home sales will increase 7.8 percent in 2013, following a 9.0 percent gain last year. Housing starts will increase 23.8 percent to 970,000, after rising 27.5 percent last year.

· Despite the recent spike in gasoline prices, which we see as temporary, the outlook for overall inflation is benign. We expect CPI inflation of 1.4 percent in 2013 following a 2.1 percent increase last year.

Outlook for the Home Improvement Products Market

· Total home improvement product sales increased 5.4 percent to $275.6 billion in 2012 – slightly ahead of our September 2012 forecast. The Census Bureau’s preliminary data on homeowners spending on residential improvements show strong third quarter growth – up 20 percent on a year-over-year basis – contributing to a 5.8 percent increase in Professional Market sales for the year. Consumer Market sales finished the year on track with our forecast – up 5.3 percent to $200.9 billion.

· Our forecast for home improvement product sales growth in 2013 is little changed from our September report. We expect slower growth of the home improvement product market in nominal dollars, with total sales increasing 4.3 percent to $287.3 billion. However, this slower growth of sales in nominal dollars is due entirely to an expected lower rate of price increases for home improvement products in 2013. In constant dollar terms, we expect growth of 3.4 percent – ahead of last year’s 2.9 percent increase.

· As employment growth accelerates and housing markets improve further in 2014, we will see stronger growth of home improvement product sales. We expect growth averaging 5.9 percent in 2014-2015, with a deceleration in the following two years as the housing market cycle runs its course.

Growth rates of Total Home Improvement market size for the current year and 5-year forecast periods are as follows:


2012

2013

2014

2015

2016

2017

Billion Dollars

275.6

287.3

304.9

322.4

335.1

345.9

% Change

5.4

4.3

6.1

5.7

3.9

3.2










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