Catalina releases industry update

Monday, July 12, 2021 from Floor Covering Weekly

[Delray Beach, Fla.] Catalina Research has released its industry update for the first half of 2021. According to the report, U.S. floor coverings sales came roaring back in the first half of 2021 as rising COVID-19 vaccination rates and a surge in personal income gave consumers confidence to replace their flooring. Residential purchases also received a boost from sharp gains in new home construction. The recovery from the pandemic recession has been much stronger than any rebound we could have imagined earlier in the year. Catalina estimates U.S. floor coverings manufacturer sales (shipments minus exports plus imports) could have increased by 32.3 percent in dollars and 24.0 percent in square feet in the second quarter of 2021. This follows 21.7 percent and 21.5 percent gains, respectively, in the first quarter. Dollar sale increases also reflect strong price increases as labor, material, and transportation costs rose. In addition, manufacturer sales are benefiting from the re-stocking of depleted inventories at distributors and retailers.

Industry growth is being led by a surge in consumer floor coverings spending. Household spending is being stimulated by rising personal income gains, which is being driven by increasing employment and wages, and government transfer payments. Homeowners are using the extra income to upgrade their work, meal, and entertainment areas. Historic low interest rates and favorable demographics resulted in a 30.7 percent increase in total U.S. housing demand in the second quarter of 2021. This follows three quarters of double-digit gains. The estimated 26.5 percent increase in existing home sales in the second quarter is strengthening the increase in homeowner flooring replacement projects.

The desire for more space and the huge Millennial population moving through their prime home buying years is giving a boost to new home construction. The 27.4 percent increase in housing starts in the first half of 2021 resulted in a similar gain in square foot builder purchases. Housing start gains are even sharper in the important single-family home market as housing preferences shift away from smaller multi-family housing.

The gain in the housing market, however, is being offset somewhat by declining commercial market sales. Commercial markets remain weak due to the drop in private non-residential building construction spending since the fourth quarter of 2020. Some of the decline in private commercial markets are being made up by government spending in healthcare and public safety facilities.

The first half 2021 recovery has given a boost to all flooring sectors. The strongest growing sectors in the first half were resilient flooring, wood flooring, and soft surface flooring. In fact, soft surface flooring could have experienced the sharpest gain on a square foot basis in the first half at 25.9 percent. This could have resulted in soft surface flooring increasing their share of total floor coverings sales in the second quarter for the first time in decades. Soft surface flooring inroads were due to the sharp gain in low-cost area rug imports.

Resilient flooring sales could have increased by 32.3 percent in dollars and 23.5 percent in square feet in the first half. These gains were spurred by the continued surge in LVT demand. Resilient flooring dollar sales also benefited from rising selling prices as import prices rose. The wood flooring sector also benefited from rising prices as lumber prices soared. Dollar wood flooring sales could have increased by 30.3 percent in the first quarter of 2021 and 38.1 percent in the second quarter, while square foot sales could have risen by 18.2 percent in the first half. Ceramic tile square foot sales could have strengthened in the second quarter as builder demand accelerated. Meanwhile, laminate flooring began to lose the share it picked up during the pandemic lockdowns. Homeowners are now preferring flooring more likely to be installed by a professional as the fear of having installers enter their home declined as the pandemic dissipated.

The recovery in U.S. floor coverings sales has been led by foreign-sourced products. Square foot imports could have increased by 35.3 percent in the first half of 2021. At the same time, U.S-made square foot flooring sales could have increased by 11.4 percent. Shipments from Vietnam have led the gains. In the first half of 2021, shipments from Vietnam have nearly tripled. Chinese manufacturers were also able to gain share in the first half after seeing their share of U.S. sales decline over the previous two years. Chinese producers have made inroads in the soft surface, resilient flooring, and laminate flooring sectors in the first half of 2021. Imports are also up sharply from manufacturers located in Turkey and India.

U.S. floor coverings manufacturer sales are expected to continue to grow in the second half of 2021, however, at more moderate rates. Dollar and square foot sales gains could dip to the single digits in the second half since comparisons are now with the recovery which began in the second half of 2020. As a result, Catalina estimates that total floor coverings sales during all of 2021 could increase by 15.4 percent and rise to $30.8 billion. During 2021, square foot sales could increase by 10.0 percent and climb to $26.3 billion.

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