The September Home Improvement Products Market sales forecast grew 2.8% in 2011 with an increase in 2012 to 4.0%

With the downgrading of the overall macroeconomic outlook, the September, 2011 IHS Global Insight/HIRI Home Improvement Products Market Forecast for total home improvement products sales for 2011 (+2.8% to $267 billion) fell short of February’s, 2011 forecast (+4.5% at $276 billion).

As employment growth accelerates and housing markets improve in 2012, we expect growth to average 4.8% over the period 2012-2016.

The National Economic Outlook

· We no longer expect a bounce in GDP growth during the second half of the year; we now expect just 1.2% growth in the third quarter and 1.5% in the fourth. Combining that with the revisions to the first half of the year puts calendar-year growth at 1.6%, down from 3.2% in our February 2011 report.

· We have also scaled back growth expectations for 2012 (to 1.9%, from 2.9%) and 2013 (to 2.2%, from 3.1%), because we have factored in a more drawn-out, laborious recovery. This is a weak growth outlook, not a recession, although we have placed recession odds at 40%, since weak momentum leaves the economy vulnerable to shocks.

· There is still no sign yet of a pickup in housing. Our forecast for improvement in 2012 had been dependent on stronger employment growth to revive household formation, absorbing excess supply. Pent-up demand for housing is building. But it is becoming harder to see that soon, so we have therefore delayed the housing improvement in our forecast (2012 housing starts are now pegged at 690,000).

· The spending cuts put in place by the debt-ceiling agreement reinforce the tightening of fiscal policy. There will be a much bigger fiscal contraction next year if the 2% payroll tax cut and emergency unemployment benefits are allowed to expire. However, we assume that they will be extended.

· Inflation concerns are easing as economic growth has weakened. A combination of higher gasoline prices and food prices points to CPI inflation of 3.0% this year, compared with 1.6% in 2010. With less pressure from oil and food, though, we see CPI inflation falling back to 1.6% in 2012.

Outlook for the Home Improvement Products Market

· Home improvement product sales growth fell short of our February forecast by about 1 percentage point in the first half of 2011 and – with the downgrading of the overall macroeconomic outlook – we expect a bigger shortfall in the second half of the year. We now expect total home improvement product sales growth of 2.8% this year to $267 billion.

· The expectation of an economic recovery that proceeds at a more sluggish pace – held back by continuing weakness in the housing market – means that a significant acceleration in the growth of home improvement product sales will be delayed. We now project growth of home improvement product sales averaging 3.7% over 2012-2013, with roughly equivalent growth in the Consumer and Professional Markets.

· As employment growth accelerates and housing markets improve in 2014, we will see stronger growth of home improvement product sales. We expect growth averaging 5.8% in 2014-2015 with a slight deceleration in 2016.

Growth rates of market size by segment for the current year and 5-year forecast periods are as follows:

	2011	2012	2013	2014	2015	2016
Billion Dollars	266.9	277.4	286.8	303.0	321.0	336.8
% Change	2.8	4.0	3.4	5.7	5.9	4.9