Slowdown Not Viewed as Negative

Slowdown Not Viewed as Negative

The kitchen and bath market began feeling the first tangible effects of the long-expected slowdown as the third quarter of 2000 reached its midway point, although industry activity remained generally robust. The slowdown, resulting from Federal Reserve actions to dampen economic growth, was evidenced in housing starts, home sales, remodeling activity and product shipments.

Among the key statistics released by government agencies and industry-related trade associations in recent weeks were the following:

Home Sales
Existing single-family home sales in 2000 will be down more than 9% from the record volume posted in 1999, "but still at fairly high levels in historic terms," the National Association of Realtors reported last month. The Washington, DC-based NAR said that, despite higher mortgage rates and dwindling inventories, home resales through June were only 6.4% below the 5.59-million sales pace reached in June of 1999 the highest level ever recorded. Both housing starts and home sales are expected to decline in 2000 as a result of the Federal Reserve's series of interest-rate increases. However, a gradual slowing in the housing sector "is good news for everyone, as it takes pressure off the Federal Reserve to tighten monetary policy," the NAR observed.

Appliance Shipments
Domestic shipments of major home appliances, exhibiting their first sign of weakness in months, declined in July compared to the same month in 1999, although year-to-date sales remained up over last year, the Association of Home Appliance Manufacturers reported. According to the Chicago-based AHAM, July shipments totaled 4.49 million units, down 9.8% from the 4.98 million units shipped in July of '99. However, year-to-date appliance shipments from January through July were up 6.1% over shipments in the same seven-month period a year earlier, AHAM reported. The July sales declines affected virtually all appliance categories, including food preservation (down 8.1%), home laundry (down 5.3%) and cooking (down 1%). The largest drop, however, came in the weather-related area of home comfort appliances, AHAM noted, adding that kitchen cleanup appliances actually rose 1.2%, even in the face of all the declines.

Cabinet & Vanity Sales
Sales of kitchen cabinets and bathroom vanities increased 7.6% in July over the same month in 1999, beginning the third quarter of 2000 in a positive fashion, the Kitchen Cabinet Manufacturers Association reported. The Reston, VA-based KCMA noted that manufacturers participating in the association's monthly "Trend of Business" survey reported that sales gains led by sales of custom cabinets were up 9.8% year-to-date through July, compared to the same seven-month period in '99.

Remodeling Expenditures
Remodeling expenditures by U.S. homeowners dipped during the second quarter of 2000, as higher interest rates began to take their toll on remodeling activity, according to a report issued by the Joint Center for Housing Studies at Harvard University (JCHS). The JCHS reported that the seasonally-adjusted annual rate of remodeling expenditures dropped 4.2%, to $97.4 billion, from the published first-quarter figure of $103.7 billion. For the future, however, the JCHS still predicted that, "even though the second-quarter figure dipped, we feel that we will see modest growth in homeowner remodeling activity throughout the remainder of the year."