Wednesday, September 7, 2016
Posted by: Matthew Craig
HIRI/IHS Markit forecast for 2015 up 5.3%, Expecting 6.0% sales growth in 2016
Total home improvement products sales are expected to increase 5.3% in 2015 to $327 billion. The Professional Market is expected to increase 6.2% in 2015 over 2014 and the Consumer Market will see a sales increase of 5.0%.
We continue to expect home improvement product sales growth to accelerate over the next two years with 2016 forecasted to increase 6.0% over 2015.
The National Economic Outlook
Real GDP growth has slowed in recent quarters, partly because of an inventory correction. Payroll employment gains remain solid.
GDP data for the first half of 2016 are showing some weakness, while employment data are pointing to strength. Second-quarter real GDP advanced at an annual rate of 1.2%, and first-quarter growth was revised from 1.1% to 0.8%. GDP growth is projected to pick up from an average annual rate of 1.0% in the first half of 2016 to 2.8% in the latter half.
The July employment report was positive and strong. There was a robust increase in payroll jobs of 255,000 following a gain of 292,000 jobs in June. In addition, hours worked and wages earned also showed strong gains.
Existing home sales reached their highest point since February 2007, while new home sales hit their highest since February 2008.
Consumer spending is expected to remain the key source of growth, supported by rising real disposable incomes. Real consumer spending growth accelerated to a 4.2% pace in the second quarter, from 1.6% in the first quarter. While total consumer spending growth is expected to moderate from this brisk pace, it continues to be supported by gains in employment, disposable income, and household net worth.
The biggest drag on growth in the second-quarter was from inventory investment, which contracted for the first time since 2011. This is estimated to have taken away 1.16 percentage points from real GDP growth.
Outlook for the Home Improvement Products Market
Our outlook for existing home sales and disposable income remains strong with projected growth of 5.5% and 2.6% in 2016, respectively. Sales of home improvement products in 2015 were stronger than previously estimated. The total home improvement market grew by 5.3% to $327 billion—with growth 0.8 percentage points higher than estimated in the March report.
Consumer Market sales in nominal dollars are expected to increase by 6.0% and Professional Market sales by 6.1% in 2016. Growth of sales in constant dollars will be stronger in both markets.
We expect growth in home improvement product sales to slow slightly from this brisk pace over the next few years. Growth is projected to average 3.9% in 2017 to 2020. While Professional Market growth is expected to be stronger in 2017, Consumer Market growth will be stronger over 2018-2020.
Our macroeconomic forecast shows a slight deceleration of home improvement spending growth in 2017 and 2018. Growth of existing home sales plateaued in 2015 and is projected to slow to an annual average of -0.2% in 2017 to 2020.
Growth rates of market size by segment for the current year and 5-year historical and forecast periods are as follows: