Hardwood Floors February/March 2025

Market Matters (Continued)

This is a summary of the December 2024 Quarterly Market Monitor Report published by Market Insights LLC. NWFA members have exclusive access to the full report, which provides forecasts and analysis of economic, market, and industry conditions and trends affecting the North American flooring market. The report includes a historical and forecasted volume of dollar sales of total wood flooring (at mill sell price) per metro area and state. Separate reports are available for the United States and for Canada. The availability of the reports on a quarterly basis will provide NWFA members with current data that can help them develop business plans, prioritize inventory, and react to market conditions in a timely manner. NWFA members may download the full report by visiting nwfa.org. Santo Torcivia is president of Market Insights LLC in Reading, Pennsylvania. He can be reached at 610.927.2299 or storcivia@marketinsightsllc.com. saps consumer spending power and reorders the purchasing priorities of affected households. • Deficit spending will weaken the U.S. dollar by increasing the money stock, raising the federal debt, and put upward pressure on inflation. • Federal debt will continue to rise, and payments on this rising debt will absorb more of the federal budget if action to reverse this trend is not undertaken. • Slowing employment growth will stymie economic growth. In 2023, 25 percent of hiring was by government and 39 percent by quasi-government education and health care sectors, leaving 36 percent new jobs. • Other potential threats to the U.S. economy include a widening war in Ukraine or the Middle East, new conflicts in Taiwan, the Persian Gulf, or other areas; a major domestic civil disturbance; another global pandemic; a major trade war threatening prices and logistical trains; or other catastrophe. • Inflation will continue to be an issue among key commodities for many families. Inflation • Election results have Republicans controlling the House, the Senate, and the White House, and they are planning to enact sweeping changes to the government. Trump’s plans include the creation of a new Department of Government Efficiency (DOGE), which will be responsible for streamlining the government, eliminating regulations, and saving $2 trillion in federal government costs. FACTORS THREATENING THE U.S. ECONOMY:

U.S. INFLATION AND PRIME RATE

% change in the consumer price index and average prime interest rate.

KEY ASSUMPTIONS AND ISSUES AFFECTING THE U.S. ECONOMY:

• Housing starts currently are above 1.35 million units annually and will continue to aid economic growth through 2029, with starts averaging 1.5 million units. Starts increasingly favor single-family units (70 percent of total starts), which average 50 percent greater floor area over multi-family units. Housing construction is getting a push from builder incentives, baby-boomer downsizing with generally considerable equity to offset higher home prices and interest rates, and investment firms financing single-family homes built for rent. • Residential home improvements will grow in the second half of 2025, growing at a moderate clip throughout the forecast period as households unwilling to sell their current low-interest financed homes in desirable neighborhoods remodel their residences. • Consumer spending is slowing as many consumers’ finances are being stretched by inflation, rising debt levels, and slowing employment growth. • Real personal disposable income will grow at an inflation-adjusted annual rate of 2 percent or greater through 2028, largely driven by moderate growth in skilled and technical worker employment increases and wage growth. Income growth will endure headwinds resulting from weak employment growth due to automation and a decline in unskilled labor jobs through 2029. • Non-residential building construction will grow throughout the forecast period, especially for education, transportation facilities, health care, lodgings, and institutional building types. Conversely, office, religious, amusement and recreation, and retail building construction, except for retail warehouses, will decline slightly.

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