Strategic Exchange: Industry gatherings will start slow in 2021 but return to normal by midyear - Jan 2021
By Kemp Harr
Happy New Year indeed. We made it through 2020, and some floorcovering businesses fared better than others last year. With the vaccine on the horizon, we are anxious to get back to a pattern of business that is less volatile and more predictable.
But the truth is that we’ve still got at least three more months of isolation and guardedness before we can relax. As the daylight hours grow longer in 2021, we should count ourselves lucky that a vaccine was developed in record time.
Brian Beaulieu, with ITR Economics, is bullish about the economic forecast for 2021. He points out that Covid-19 was a natural disaster that struck during a time of prosperity, and the recovery will be swift for most sectors. Remember last April when we were debating the shape of the recovery? It does appear, at least with regard to GDP-a measure of the entire economy-that we’re looking at a V-shaped recovery, according to Beaulieu.
The one exception, which will affect a number of our readers, is the commercial sector or, as the economists categorize it, non-residential construction. The sectors impacted the worst are hospitality and retail stores followed by office, which is the largest from a floorcovering perspective. Geographically, the Northeast will suffer the most. Beaulieu admits in his latest forecast that it could be 2023 before the commercial market fully recovers. Dodge is calling for a 5% uptick in commercial starts for 2021, but we all know that flooring is one of the last products to be installed. We also learned last month that the Architecture Billings Index for November was down another point to 46.3. This is the ninth consecutive month of decline.
There is a good chance that the Biden administration will stimulate the commercial construction sector with an infrastructure bill. Granted, much of that will go toward highways, utilities and other non-flooring-type projects, but there’s bound to be some buildings in the package. You may recall the term “shovel ready” from 12 years ago.
In the residential sector of the flooring business, the homecenters most definitely took share in 2020. We’ve heard estimates of 15% growth for the year through that channel. Virtually all of that growth was in hard surfaces. The carpet sector overall ended the year down substantially, but the order rate for higher-end carpet beat prior-year numbers for the last four months.
Seasoned flooring veterans know that remodel sales normally drop off in December as much as 20% to 25% from the October rate, but this year, they remained steady throughout the fourth quarter, as homeowners insisted on getting the work done as soon as the dealer could get the product in stock and the installers scheduled.
Tariffs have been a big topic in the flooring business for the last couple of years, and despite the fact that we’ll have a new president later this month, there is a strong chance that the existing tariffs will remain in place, and we could see new countries, like Vietnam, which has recently been accused of currency manipulation, punished with some type of duty.
Country of origin might be more of a deciding factor among consumers who hope to get the economy on track. In a recent survey of 500 consumers conducted by the Reshoring Institute, 70% said they prefer American-made products for two reasons: better quality and helping to put more Americans to work.
Five rigid LVT producers-Novalis, CFL, Wellmade, GreenView and Huali-announced last year that they were collectively going to spend nearly $200 million and hire over 1,200 people to ramp up production here in the U.S. We hear that the pandemic may have slowed their ability to transfer the knowledge to the American worker, but most of them are moving forward on a delayed schedule. This should shift the balance of U.S.-made rigid LVT, especially when you factor in the more established production from Mannington, Mohawk, Shaw and Nox.
A DIFFERENT SHOW SCHEDULE FOR 2021
This won’t be our normal January in the flooring industry. I mentioned earlier that the first quarter might remain quiet from a travel perspective. In looking at the calendar, Mohawk has the first face-to-face event scheduled for Dallas at the end of January, and then it has events scheduled almost every week to the first of March. The first regional flooring show is in Atlanta on March 11 and 12, followed by Dallas on April 8 and 9. The National Flooring Alliance is meeting in Vail, Colorado in late March. The National Wood Flooring Association show is scheduled for late April. Hopefully by May we’ll all be vaccinated, and travel will return to some level of normalcy.
If you have any comments about this month’s column, you can email me at firstname.lastname@example.org.
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