HIRI forecasts 6.3 percent sales gain this year

Home Channel News, July 17, 2000 by Don Longo

Research institute predicts sales will grow 4.5 percent per year through 2004

TAMPA, FLA. -- New research from the Home Improvement Research Institute suggests that sales of home improvement products will increase by 6.3 percent this year to a record $168.9 billion. Evidence is mounting, however, that interest rate hikes are starting to impact this market.

The new report, compiled for HIRI by Standard & Poor's DRI, projects home improvement product sales to grow at a rate of 4.5 percent per year through 2004. This pace will still exceed retailing in general during that period.

The report projects this growth rate will remain strong owing to current high levels of personal wealth and relatively low mortgage interest rates.

* Evidence for an economic slowdown is mounting, as the pace of retail sales growth and overall consumer spending has slowed and the unemployment rate ticked up in May. However, while the Federal Reserve's tapping of the monetary brakes is finally slowing the economy, DRI believes that the economy will avoid the threat of recession posed by higher inflation, heavy debt burdens and the stock market correction. Long-term trend growth of real gross domestic product has been revised upward to average over 3 percent.

As for the national economy, DRI's current forecast states:

* Consumers are still driving the economy, according to DRI. Consumer confidence increased further in May, despite stock market declines and oil price increases. (After DRI completed its survey, The Conference Board's Consumer Confidence Index in June fell six points.) Forecasters, however, do not believe the 5 percent-plus pace of real consumer spending growth over the last two years can be sustained. Spending on durable goods, which have led the charge, is expected to slow considerably, from 11.4 percent growth this year to 3.2 percent in 2001.

* Housing remains affordable, and DRI expects sales to stay high, although less than last year's record levels. In the first clear signs that higher interest rates are having an impact on the economy, new and existing home sales declined in April in response to the mortgage rate's increase above 8.5 percent. Nonetheless, high levels of household wealth and still-low mortgage rates will continue to push the home ownership rate up, positively impacting the home improvements market.