U.S floor coverings manufacturer sales for 2018 ended up higher than the estimates Catalina issued earlier in the year. Dollar sales (shipments minus exports plus imports) are estimated to have increased by 5.3 percent in 2018 to $27 billion, while square foot sales could have increased by 4.5 percent to 23.6 billion, Catalina said. This is up from 4.1 percent and 3.2 percent, respectively, estimated earlier in the year. The stronger gains in the second half is primarily due to a 20 percent increase in dollar and square foot imports in the third quarter. Import shipment gains were led by a 40 percent increase in luxury vinyl tile and other resilient flooring imports and double-digit increases for carpet and rug and wood flooring imports. A significant portion of these gains reflect distributors and retailers pushing up of orders for Chinese-made flooring to beat the 10 percent tariff imposed on Chinese-sourced products in September and the possibility of a 25 percent tariff imposed sometime in 2019.

As a result of the import surge, dollar manufacturer sales are estimated to have increased by 6.2 percent in the second half of 2018, up from 4.3 percent in the first half. Square foot sales could have been 5.9 percent in the first half, up from a 3.0 percent gain in the first half. Dollar sales gains in the second half also received a boost from stronger price increases in carpet and rugs and wood flooring sectors. In any case, the second half manufacturer sales gain seem to have outpaced demand which could have resulted in higher inventories at distributors and retailers.

Inventories probably rose since residential floor coverings replacement spending, the most important end-use market, could have increased closer to 4.1 percent in the first half of 2018, and about 5.0 percent in the second half. The total 2018 increase is estimated to have been closer to the average increase in residential replacement sales over the current recovery period. In recent years, residential replacement spending benefited from stronger employment and income gains, as well as rising home prices. Rising home prices gave non-moving households’ incentive to invest in new floorings.

Floor coverings sales growth also received a boost from stronger commercial demand in the second half of 2018. Commercial demand strengthened in private and institutional markets. The gains in commercial markets offset the weakening of builder purchases. By the fourth quarter of 2018, the builder market was being adversely affected by rising interest rates and affordability issues as new home prices rose. As a result of these issues, housing starts began to decline in the fourth quarter of 2018. This followed a nearly 7.0 percent gain over the first nine months of the year. This led to flat spending on residential construction, while nonresidential building construction spending could have increased by 7.2 percent.

The overall sales trend, however, reflect a divergence of growth by market sector. In 2018, hard surface flooring sales could have increased by 8.4 percent in dollars and 9.1 percent in square feet. On the other hand, soft surface flooring sales increased by only 1.5 percent in dollars and no gain in square feet. As a result, carpet and area rugs are estimated to have dropped to 43.5 percent of total dollar floor coverings sales and 48.6 percent of total square feet in 2018. This is down from 45.1 percent and 50.8 percent, respectively, in 2017. During the fourth quarter of 2018, soft surface flooring could have declined to 42.0 percent of dollar sales and 47.4 percent of square foot sales.

In 2018, the strongest gains were in the resilient flooring sector, led by gains in LVT sales. Total resilient flooring sales could have increased by 21.2 percent in dollars and 18.3 percent in square feet. In the fourth quarter of 2018, resilient flooring could have represented 21.0 percent of total dollar sales and 26.0 percent of total square foot sales. This is up from 16.9 percent and 20.9 percent, respectively, for all of 2017. In 2018, ceramic tile also gained share. However, the wood and laminate flooring markets lost ground in 2018 due to rising competition from rigid core LVT.

Floor coverings manufacturer sales growth rates, however, are estimated to slow during the first quarter of 2019 as distributors and retailers work off excess inventories accumulated over the second half of 2018. Square foot manufacturer sales are estimated to increase by only 2.6 percent during the first quarter of 2019, down from a 4.1 percent gain in the first quarter of 2018. Sales gains are also expected to weaken as the Federal Reserve interest rate increases over the last year filter through the housing market and the overall economy.