[Delray Beach, Fla.] Catalina Research has released its latest Floor Coverings Industry Quarterly Update. According to the report, U.S. floor coverings sales remained strong in dollars in the fourth quarter of 2021 as price increases strengthened. Square foot sales gains, however, slowed as the housing market and personal income weakened from the fourth quarter of the previous year. Square foot sales could have also been negatively impacted by supply chain issues. U.S. floor coverings manufacturer sales (shipments minus exports plus imports) could have increased by 19 percent in dollars and 9 percent in square feet in the fourth quarter of 2021, compared to the fourth quarter of 2020. However, this is down from 25.1 percent and 20.6 percent, respectively, over the first three quarters of 2021. For the entire year, U.S. floor coverings manufacturer sales could have climbed to $32.8 billion and 27.8 billion square feet.

The slowdown in square foot sales could reflect the leveling off of home sales as dwelling prices soared. New home completions and existing home sales could have declined in the fourth quarter of 2021 after experiencing strong gains over the first three quarters of the year. The decline, however, may not reflect a drop in underlying demand. Instead, builders could be slowing completions due to their own supply chain and labor issues, while existing home sales could be weakening due to the extremely low inventory of homes for sale. On the other hand, there could be resistance to the surging home prices. This can be seen in the sharp increase in the supply of new unsold homes over the past year. The supply of unsold homes increased sharply as new home prices rose by more than 20 percent in the fourth quarter of 2021. Existing home prices also increased at double digits in 2021.

Sharp floor coverings price increases could also be crimping demand. The average value per square foot of flooring sold by manufacturers could have increased by 8.3 percent in the fourth quarter of 2021 after rising only 3.2 percent over the first nine months of the year. Fourth quarter price increases were strongest in the wood and laminate flooring and ceramic tile sectors. At the same time, however, personal income gains leveled off as the government stimulus spending ended, and overall inflation rates spiked. These trends could have further hampered demand as consumer confidence to purchase a home waned in the fourth quarter.

On the other hand, spending by non-moving households remained at relatively strong rates. However, factoring out price increases shows a different picture. Consumer floor coverings spending could have increased by 12.9 percent in the fourth quarter of 2021, down from 18.3 percent over the first nine months of the year. When factoring out manufacture price increases, the fourth quarter gain was closer to 5 percent, down from double-digit rates over the first three quarters of 2021.

Catalina estimated U.S. floor coverings sales could remain at relatively strong rates in the first quarter of 2022 despite emerging drags on demand. U.S. square foot floor covering sales could increase by 7 percent during the first quarter of 2022. This is a sharp slowdown from 2021, however, remains double the historic industry growth trend. Coupled with rising prices, dollar sales could continue to increase at double-digit rates in the first quarter.

If current trends continue, resilient flooring could become the leading U.S. floor coverings product sometime in 2022 as LVT sales continue to soar, while carpet demand weakens. Wood flooring is also gaining share due to surging prices as lumber prices increase, and homeowners increase their preference for higher-end floorings as home values rise sharply.

First quarter 2022 gains, however, could depend heavily on sorting through supply chain issues. Foreign-sourced products continue to gain share in the U.S. market despite COVID production problems in Asian countries and port bottlenecks in the United States. Foreign-sourced products could have captured about 62 percent of total U.S. floor coverings square foot sales in the fourth quarter of 2022, up from a 56 percent share for all of 2020. In fact, U.S. floor coverings imports increased at a rate four times greater than those for domestic shipments in the fourth quarter of 2021. In the strong growing hard surface flooring lines, imports increased at a rate double for those of domestic shipments. Foreign-sourced products made significant inroads in the U.S. market despite U.S.-and foreign based competitors investing some $3 billion in domestic production capacity over the past five years.

As a result, U.S. floor coverings sales in 2022 will depend on how well foreign manufacturers can supply the domestic market. Sales will be impacted by the spread of the Omicron and other COVID variants, and the ability of the U.S. transport system to deliver increased volumes. Developments in China and Vietnam will be most important since some 46 percent of total dollar imports in 2021 originated from these two countries.

In addition, 2022 growth trends will be impacted by Federal reserve actions on interest rates and credit availability. If the Fed moves to quickly, they will have a negative impact on home sales and overall residential floor coverings demand.

For more on this report and others from Catalina Research, visit http://www.catalinareports.com/.