If you read the news, turn on the radio or have a friendly chat with coworkers at the water cooler, inflation is a topic that tends to dominate the conversation — and for good reason. Widespread price increases are affecting most people’s day-to-day lives. While this discussion applies to many markets, for our readers, it’s important to note the impact on the home improvement market.
Supply and demand are driving factors in any market, and home improvement is no different. The industry has experienced a perfect storm of events leading up to material shortages that are still causing struggles well into 2022.
When COVID-19 emerged, much of the country and economy shut down, fueling expectations that the economy would fall off a cliff. While it did just that in some sectors, the home improvement industry behaved differently.
As homeowners spent more time in their homes than ever before, many decided to finally take on the home improvement projects they had previously put off. Unfortunately, a good number of suppliers of commodities and products stopped producing, expecting demand to drop. That led to a high-demand/low-supply environment, forcing prices higher.
Since the start of the pandemic, numerous factors have continued to elevate prices:
With all of these headwinds, demand remains quite high, keeping prices on a steady rise for largely scarce goods.
However, the current environment cannot last forever. Overall, inflation as of April 2022 was at 8.3% — significantly higher than what we have seen in recent history. The price of food has increased 9.4%. Gas prices have risen more than 40% (not to mention the more than 80% increase in oil prices).
These factors affect most people’s daily lives. With wages up only about 4% in the same timeframe, consumers will begin to rethink secondary spending in areas such as home improvement, as food, gas and other necessities become less affordable.
We expect to see a cooling off in home improvement demand this year because of the above circumstances. In some situations, consumers will opt for more affordable products. However, in other instances, we will see them forego purchases altogether. The market is still in a strong position, but we do not expect a third straight year of double-digit growth in home improvement product purchasing spend.
No matter what forces act on the market, the Home Improvement Research Institute provides the research and insights your company needs to make informed decisions. Consider HIRI membership to stay up to date with the latest forecasts.
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