Floor Covering Statistical Report 2017 Summary
Friday, July 06, 2018 by Floor Covering Weekly
U.S. floor coverings sales strengthened in 2017 due to rising consumer confidence and sharper increases in single-family home construction. According to Catalina Research, U.S. floor coverings dollar sales are estimated to have increased by 4.8 percent in 2017 to $25.5 billion. This is up from a dollar sales gain of 4.4 percent in 2016. Square foot sales increases, however, did not keep pace due to a decline in multi-family housing starts and a slowdown in commercial markets. As a result, quantity sales increased by 3.7 percent to 22.4 billion square feet. This is down from a 4.9 percent increase in 2016. A 1.2 percent increase in average selling prices contributed to weaker square foot growth.
The most surprising trend in 2017 came from the growth in residential replacement sales. Household floor coverings spending increased an estimated 5.5 percent in 2017, after increasing by only 3.4 percent in 2016. Household floor coverings spending benefited from a double-digit increase in residential improvement construction spending. In 2017, homeowners became much more confident to invest in improvements due to rising home prices, the wealth effect of a soaring stock market, and continued gains in employment and personal income. Turnover of existing homes usually drive home improvement spending. However, non-movers stimulated floor coverings spending in 2017 as existing home sales leveled off due to a lack of homes for sale.
Builders also remained the growth leader in 2017 as construction of single-family homes offset the decline in multi-family starts. In 2017, single-family home starts increased by 8.6 percent, while multi-family starts declined by 9.8 percent. This is important since the average single-family home built is more than twice the size of the average multi-family housing unit constructed. As a result, square feet built increased by some 10.0 percent in 2017, and builders increased their share of total U.S. floor coverings sales.
On the other hand, commercial market gains weakened as increases in nonresidential building construction spending slowed substantially. In 2017, total nonresidential building construction spending increased by only 2.1 percent, down from an 8.2 percent gain in 2016. The decrease was led by a significant slowdown in the private commercial market.
Meanwhile, sales continued to shift to hard surface flooring in all end-use markets as demand for wall-to-wall carpet declined. Hard surface flooring sales received a boost from the surge in luxury vinyl tile (LVT), wood plastic composite (WPC), and other hybrid product sales. Sales gains were also relatively strong in the ceramic tile sector. These trends resulted in hard surface flooring square foot sales increasing by an estimated 7.2 percent in 2017, while soft surface flooring square foot sales increased only 0.6 percent. This caused soft surface flooring to lose share. In 2017, soft surface flooring accounted for 51.2 percent of total square foot floor coverings sales, down from 52.8 percent in 2016. Carpet and area rug dollar sales, however, dropped to 45.4 percent of total floor covering sales since hard surface flooring selling prices are some 26.0 percent above those for soft surface flooring. In comparison, soft surface flooring captured more than 70 percent of total floor coverings sales in the mid-1990s. Consumer preferences shifted to hard surface flooring as manufacturers introduced innovations such as floating-floor click-installed engineered wood flooring, digitally-printed porcelain tile, and vinyl planks.
To meet rising U.S. demand, domestic- and foreign-based manufacturers increased investment in new U.S. production capacity. Despite this effort, imports continued to take share from U.S.-made flooring, particularly in the resilient and laminate categories. In 2017, imports accounted for an estimated 36.5 percent of total dollar sales. This is up from 35.0 percent in 2016, and 32.9 percent in 2015. Foreign-sourced products continue to make inroads in the U.S. flooring market since they remain price-competitive, primarily sourced from Chinese manufacturers. In 2017, Chinese-produced flooring accounted for 44.0 percent of total dollar imports and an estimated 16.1 percent of total U.S. sales. This is up from 40.1 percent and 13.3 percent, respectively, in 2015. Chinese manufacturers have also made inroads by introducing innovative products. Chinese import gains were led by LVT and related floorings between 2015 and 2017. Chinese imports of these products increased by 118.2 percent over this period, while total U.S. sales rose by an estimated 70.6 percent.
Changes in product mix and sourcing is not expected to change the growth prospects of U.S. floor coverings sales over the next five years. Catalina forecasts dollar and square foot sales to increase 3.0 percent to 4.0 percent annually over this period. Growth is expected to remain in this range as long as U.S. economic growth keeps employment and personal income on an upward trend. Builder purchase gains could continue to gain share as millennials, who have been kept out of the housing market during the current recovery, begin to form households and enter the housing market. However, rising interest rates could be a headwind for consumer and business floor coverings spending over the next few years.