Tuesday, December 28, 2010

Can strong growth in flooring sales depend on the success of the electric car?

FLOOR COVERING STATISTICAL TRENDS AND OUTLOOK

It may not seem logical to the casual observer that there would be any relationship between US floor covering sales and the success of the electric car. However, consider this. Historically, the introduction and commercialization of new technology has usually led to stronger economic growth and sharper gains in personal income and consumer spending. The resulting sharp gain in personal income and consumer spending has always led to strong floor covering sales growth.

These correlations can be seen in the late 1990s, when the Internet became commercialized and revolutionized the way we communicate, shop, and seek entertainment. The Internet revolution led to a surge in new business investment, soaring employment, and rising productivity. As a result of these positive trends, US real disposable personal income increased close to 4.0% annually between 1996 and 2001. This relatively strong increase in personal income led to a 5.6% annual gain in dollar floor covering sales over this period. This shows there is a very positive relationship between gains in personal income and flooring sales.

Conversely, real disposable income growth fell below 2.0% per year between 2005 and 2010 as the economy turned recessionary and the severe credit crunch led to the housing bust. Over this period, flooring sales declined 5.0% annually. So far, government stimulus programs and Federal Reserve money creation efforts have not been able to re-ignite the economy and personal income growth.

What is needed to jump start personal income growth is a new round of technological innovation that will reduce household costs and increase employment. This time the new technologies can be found in solar energy products and the development of the electric car. For the first time in 2011, a homeowner will be able to purchase an electric car, such as the Chevrolet Volt or the Nissan Leaf, and also invest in new roofing materials, such as Dow Powerhouse Solar Shingles, to provide their own transportation energy system.

Imagine waking up in the morning and not having to pay for gasoline for your car or electricity for your home. Think about how that would cut your household costs. Then add the surge in employment as homeowners invest in new solar equipment and electric cars. This would boost consumer incomes and spending. These actions will give homeowners added spending power for home improvements, including purchases of new flooring.

This is the type of economic stimulus that is needed for a real recovery in flooring sales. What do you see leading a surge in US real personal income?

Stuart

Stuart Hirschhorn is a member of the Floor Covering Institute and Director of Research of Catalina Research, Inc. which provides in-depth market research on the floor covering industry.



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