HIRI/IHS Global Insight up 4.0% in 2014, Expecting 5.7% sales growth in 2015
Friday, June 19, 2015
Posted by: Elizabeth Nicholas
Total home improvement products sales increased 4.0% in 2014 to $303 billion. The Professional Market increased 3.4% in 2014 over 2013 and the Consumer Market will see a sales increase of 4.3%.
We continue to expect home improvement product sales growth to accelerate over the next two years with 2015 forecasted to increase 5.7% over 2014.
The National Economic Outlook
Two profound transformations are affecting the US economy right now: lower oil prices and a rising dollar.
The rising dollar will subtract from GDP as exports suffer and strong consumer spending continues to bring with it a surge in imports. The result will be a widening trade deficit, which will subtract 0.6 percentage points from GDP growth in 2015 and 0.5 points in 2016.
The positive benefits of lower oil prices will trump the negative aspects, however, amounting to a net gain of about 0.5–0.6 percentage points of real GDP growth. Some of this occurred already in 2014, but a sizable portion remains for 2015.
The net result will be an acceleration of real GDP from growth averaging 2.3% over the last three years to 3.0% in 2015.
Employment has posted several months of steady gains, and we expect this to continue with total nonfarm employment up 2.2% in 2015 after rising 1.9% in 2014.
As the unemployment rate falls farther, wages should begin to accelerate, supporting stronger consumer spending. We expect real consumer spending to accelerate from 2.5% in 2014 to 3.6% in 2015 and 3.3% in 2016.
Both home building and existing home sales underperformed in 2014. We continue to project housing market activity to improve in 2015, but the expected pace of growth is now slower. Housing starts are projected to increase by 17.1% and existing home sales by 10.4%.
Outlook for the Home Improvement Products Market
Sales of home improvement products through the major home centers posted a strong fourth quarter and solid full-year results for 2014, with combined growth above 5%. But home improvement product sales through other channels of distribution lagged. Sales of floor covering stores, appliance stores and department stores all fell 2-3% in 2014. Thus, we estimate total Consumer Market sales of home improvement products increased by 4.3% in 2014 to $221 billion – short of our September 2014 forecast. Professional Market sales growth also fell short of expectations as existing home sales finished the year on a weak note. Professional Market sales increased by 3.4% in 2014, putting total home improvement product sales up 4.0% for the year.
With continued strong employment growth, a pick-up in wage growth, and the consumer dividend from lower gasoline prices, we expect the pace of home improvement product sales growth to accelerate in 2015. However, the gradual rebound in housing activity we anticipate will provide only a modest boost to sales. We project total home improvement product sales to increase 5.7% in 2015, with Consumer Market sales up 5.9% and the Professional Market advancing 5.0%.
The pace of growth will then slow somewhat as housing market activity slows. But the fundamentals of consumer demand will remain strong, and home improvement product sales will see growth of 4.8-4.9% in 2016-2017 and an average of 4.1% in 2018-2019.
Growth rates of market size by segment for the current year and 5-year historical and forecast periods are as follows: