Strong Q1 floor covering growth
Tuesday, April 13, 2021 from Floor Covering Weekly
Industry growth is being led by double-digit increases in consumer floor coverings spending. Household spending is being stimulated by rising personal income gains, which is being driven by rising employment and government transfer payments. Homeowners are using the extra income to upgrade their work, meal, and entertainment areas since the pandemic lockdowns altered family lifestyles. Historic low interest rates also resulted in a 23 percent gain in existing home purchases in the fourth quarter of 2020. The turnover of an existing home is more likely to lead to a flooring replacement project that for non-moving households.
The desire for more space and the huge millennial population moving through their prime home-buying years also gave a boost to new home construction. The 11.5 percent increase in housing starts in the fourth quarter of 2020 will result in double-digit builder floor coverings purchases in the first half of 2021. 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 bring offset by declining commercial market sales. Commercial markets remain weak due to the double-digit decline 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 on health and public safety facilities.
The best part of the current recovery is the lifting of all sectors. Catalina estimates sales in every sector of the U.S. floor coverings market – hard and soft surfaces – increased in the first quarter of 2021. Hard surface floor coverings manufacturer sales could have increased by 10.9 percent in dollars and 8.6 percent in square feet in the first quarter. Hard surface flooring sales gains continue to be led by increases in the resilient flooring sector. Resilient flooring sales could have increased by 17.2 percent in dollars and 10 percent in square feet. These gains were spurred by the continued surge in LVT demand. Resilient flooring dollar sales also benefited from rising average 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 10.9 percent in the first quarter of 2021, while square foot sales could have risen by 4.7 percent. Conversely, ceramic tile square foot sales could have increased nearly 10 percent in the first quarter of 2021 as average selling prices declined.
Meanwhile, carpet and rug sales could have increased by 4.4 percent in dollars and square feet in the first quarter of 2021. Catalina estimates soft surface flooring sales could increase for the first time in dollars and square feet since 2017 as U.S. carpet and rug production and prices recover from the pandemic-induced recession. Soft surface flooring, however, continues to lose share to hard surface. In the first quarter of 2021, carpet and area rug sales could have accounted for 39.5 percent of total dollar floor coverings sales, down from a 40.9 percent share in the first quarter of 2020. On a square foot basis, soft surface’s share could have declined to 45.1 percent in the first quarter of 2021, down from a 46 percent share in the first quarter of 2020. Over the past decade, hard surfaces took about 13 percent of total share from soft surfaces.
The recovery in U.S. floor coverings sales has been led by foreign-sourced products. Square foot imports could have increased by 13.8 percent in the first quarter of 2021. At the same time, U.S-made square foot flooring shipments could have increased by only 3 percent. However, there has been a shift in the source of supply of all types of flooring. Manufacturers located in Turkey, India, Spain and Vietnam, and other countries continued to make inroads in the U.S. floor coverings market in early 2021. Meanwhile, Chinese manufacturers continue to lose ground due to the 301-Tariffs imposed on all Chinese-made flooring and the anti-dumping duties imposed on Chinese-made ceramic tile and wood flooring. As a result, products shipped from China could have accounted for 42.5 percent of total U.S. floor coverings dollar imports in early 2021, down from a 46.6 percent share in early 2020. This downward trend is expected to continue in the near term since the Biden administration is in no hurry to cancel the 301-tariffs on Chinese-made flooring.
U.S. floor coverings sales growth is expected to remain strong in the second quarter of 2021, while easily beating the pandemic reduced 2020 sales. Consumer purchases are expected to lead the way as personal incomes receive another boost from the stimulus checks currently being sent. Rising incomes and employment are contributing to increasing consumer sentiment, as well as the progress being made in vaccinations. The Federal Reserve is also keeping interest rates near historic lows which is giving a boost to existing and new home sales. In addition, manufacturer dollar sales are benefiting from rising prices as producers pass through increasing material, labor and transportation costs.
For more on this report and others from Catalina Research, visit http://www.catalinareports.com/.