This month, the International Surface Fabricators Association (ISFA) published its annual Countertop Industry Outlook. This forecast is prepared each year by Kevin Cole, the communications director for ISFA and editor of the association’s magazine: Countertops & Architectural Surfaces.
As always, Cole analyzes a variety of metrics to make an honest, and usually on-point, prediction about what the year holds in store for the countertop industry, starting with economy and working more specifically to factors that directly impact fabricators.
In 2017, the general economy had moved in a positive direction with a 2.3 percent increase in real gross domestic product (GDP), which is up from 1.6 percent in 2016. GDP is expected to continue to rise in 2018.
“Broadly speaking, the prospects for continued economic expansion in 2018 look reasonably bright,” said William Dudley, president and CEO of the Federal Reserve Bank of New York. “The economy is likely to continue to grow at an above-trend pace, which should lead to a tighter labor market and faster wage growth.”
As far as the general construction industry, which is measured by FMI, a major construction consulting firm, the outlook remains positive.
“CEOs are generally positive and upbeat about growth right now, but there’s an undercurrent about when the cycle might correct itself since this run has lasted so long,” said Scott Winstead, president of FMI. “The 2009 downturn still rings loudly in executives’ minds, so they’re looking at how to pro-actively address business challenges while the market is still strong.”
The countertop industry is very closely tied to the housing market, which showed growth in 2017 but not as much as it had in the past six years. In addition, all of the growth was in single-family homes while multifamily dwellings dropped for the second year.
In 2017, housing starts grew by 2.5 percent compared to 6 percent the previous year. Multifamily housing dropped by nearly 10 percent, substantially more than the 1.2 percent decrease in 2016. Single-family homes, however, grew by 8 percent last year, down from 9 percent in 2016.
Looking into 2018, the National Association of Home Builders (NAHB) predicts housing starts will grow by 3.4 percent by the end of the year, then slow to about 3 percent in 2019.
Growth slowed significantly in the nonresidential construction market in 2017 compared to 2016. Lodging increased by only 7.5 percent from 22.9 percent the previous year. Office space fell from 21.2 percent to 4.9 percent growth. Educational construction growth dropped to 0.8 percent from 5.5 percent, but educational construction grew by 1.9 percent after a 1.1 percent decrease in 2016.
FMI predicts that 2018 will be up in nonresidential construction across the board. The group forecasts that growth will improve for office construction the most, followed by commercial, lodging and healthcare.
The remodeling/home improvement sector is also showing continued growth. According to the American Society of Interior Designers (ASID), the interior design industry will grow, but at a slower pace than originally predicted.
“The overall outlook for the profession remains positive and similar to the pace of the U.S. economy,” states ASID’s forecast. “The likely result is that [home improvement] will advance at a reasonable, though not spectacular, rate in 2018 and 2019.
The Joint Center for Housing Studies at Harvard University is more optimistic, however. According to Harvard’s Leading Indicator of Remodeling Activity (LIRA), the remodeling sector grew by 6.5 percent in 2017, which should rise from 6.9 percent to 7.5 percent in 2018.
Cabinet sales continued to grow in 2017, but the increase has dropped for four straight years. As per the Kitchen Cabinet Manufacturers Association (KCMA) sales growth slowed from 4.5 percent in 2016 to 2.9 percent in 2017.
Once again, the countertop market has been directly analyzed by the Freedonia Group, which is now part of MarketResearch.com. According to a 2017 Global Countertops Market report and a 2015 Countertops report, quartz remains the fastest growing countertop material, and the five largest material suppliers are Wilsonart, Formica, Panolam, DuPont and Cosentino.
U.S. demand for countertops is expected to increase 4.2 percent per year to a total of 810 million sq. ft. in 2019.
“Growth will be propelled by a rebound in new building construction activity as well as increased spending on improvement and repair of existing structures,” stated the report. “Value gains will also receive a boost due to a shift in the product mix from laminates to higher priced alternative materials.”
Laminate still receives the largest market share among the various countertop materials, but that share will continue to fall even though use is expected to grow by 3.4 percent through 2019.
“Laminates will maintain a significant share of the countertop market and account for over one-third of sales through 2019,” states the report. “These materials remain popular… due to their favorable performance characteristics at reasonable price points. Product developments providing a more stone-like appearance, such as high-definition graphics and complex edges, will also help to limit the decline in market share.”
Granite sales are also expected to increase, but high-end homes and businesses are moving toward other types of surfaces, such as engineered stone, metals, concrete and recycled materials.
Solid Surface will hold steady in third place with growth ranging from 3.1 to 4.3 percent in 2019 while engineered stone, in the fourth spot, will increase by 5.8 percent.
In fifth place is “cast polymer” countertops with growth predicted to increase from 2.3 percent to 3.6 percent through 2019. Tile holds the sixth spot, its use in countertops should increase over the next couple of years.
Finally, a significant increase is expected in the “other materials” category, which is slated at 10.1 percent per year through 2019.
According to ISFA, “the data paints a somewhat conflicting picture with a bit of potential volatility. However, overall, when looking at the data in terms of the general economy down through more specific and related markets, it seems like a safe summation to say that 2018 will be another year of growth for the countertop/surfacing industry, but perhaps slower growth than that of the past several years.”