With so many incredible products on the market, competition among manufacturers is fiercer than ever before. Exchange rates, which previously favored Brazilian manufacturers and put Italian and Spanish at a competitive disadvantage, have shifted, with the Euro losing value relative to the dollar and the real gaining value. To some extent, this is leveling the playing field between the major players in the U.S. ceramic tile market.
There are, however, some unknown factors that could affect the growth of the ceramic tile market during 2006. One of the factors is the price of crude oil, which remains around $60 per barrel after reaching an all-time high of more than $70 in September. The high cost of oil, as well as natural gas, has raised manufacturing and transportation costs for ceramic tile, eroding profit margins for manufacturers. Another key factor affecting the U.S. ceramic tile industry is the growth of the housing market, which continued throughout the past year. It is unclear how long this growth can continue unabated, and some economists are predicting a slowdown to occur during the next year.
Adding to the likelihood of this situation is the continued increase of interest rates. The Federal Reserve recently raised the prime rate for the 13th time; a continuation of this trend may adversely affect the housing market. So far, homebuyers have remained unfazed by rising interest rates, and sales of new and existing homes have been strong throughout 2005. For 2006, sales are expected to make it the second strongest year on record, according to the National Association of Realtors. Taking all these factors into consideration, the ceramic tile industry seems to be on track for another year of solid growth.