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FLOORING SALES AND THE CORONAVIRUS


At Surfaces 2020, I noticed the vendors were cautious while the attendees were optimistic.  

Our March issue of the Floor Coverings Quarterly Update has pointed to a reason why.  Manufacturer floor coverings sales were weak throughout 2019 due to the housing recession from mid-2018 to mid-2019 as the Federal Reserve raised interest rates.  Manufacturer sales last year were also hurt by the surge in retail orders in late 2018 to beat the tariff increases on Chinese-made floor coverings.  The result was an accumulation of inventories at the retail level as consumer sales turned sluggish along with the drop in housing demand.

However, floor coverings retailers began to gain confidence as housing demand recovered in the second half of 2019 as the Federal Reserve reversed course and lowered interest rates.  By the fourth quarter of 2019, consumer floor coverings spending was accelerating and retail inventories were being worked off.  So, retailers were ready to order once again.

By the time retailers arrived in Las Vegas for Surfaces 2020, the U.S. housing market was surging. 

· Housing starts soared by 35.4% in the first two months of 2020.

· Existing home sales increased by almost 10.0% in January and February.

· Homeowner improvement construction spending surged by almost 20.0% in January of this year.

And then the coronavirus hit and the U.S. economy was shut down.  Depending on the number of weeks or months before the economy can get back to “normal”, U.S. housing demand can shrink from 15.0% to 25.0% over the next three quarters.  Manufacturer sales could decline at a similar rate.

However, once the reins are taken off the economy and consumers regain confidence, floor coverings sales are expected to spring back sharply.  Home furnishing and flooring purchases will receive a boost from historically low interest rates as housing demand rebounds at double-digit rates once again.

· Households may also decide to trade up to larger dwellings looking for more room to work-at-home.

· In addition, non-movers may be motivated to invest in home improvements and new furnishings after spending weeks or maybe months looking at their old and now much more worn furnishings and flooring.

Will you be ready for the recovery in floor coverings demand in 2021? 

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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