As ceramic tile industry professionals gear up for two major upcoming trade shows, Surfaces 2005 and Cevisama 2005, a major question on everyone's mind is whether the industry can continue its growth for another year, despite the continued deflation of the dollar and rising interest rates. During the past year, record low interest rates kept the real estate market the strongest it has been in almost two decades, which in turn drove increased consumer demand for floor coverings, particularly ceramic tile and wood flooring. In addition, the remodeling market also experienced strong growth this year. According to the National Association of Homebuilders, the Remodeling Market Index was a point higher in the third quarter of 2004 than in the second quarter, from 50.6 in the second quarter to 51.8 in the third quarter. These figures suggest that the remodeling market will likely remain strong throughout 2005, which will continue to benefit the ceramic tile industry. Domestically, manufacturing has made significant gains during 2004, and consumer confidence is also on the rise. With so much positive economic news in the past year, it's hard not to be optimistic about the outlook for 2005.

However, there are some serious concerns to consider, namely the continued devaluation of the dollar versus other currencies, particularly the euro, as well as skyrocketing oil prices and the growing U.S. trade deficit. Any or all of these issues have the potential to seriously disrupt the steady growth which the ceramic tile industry has enjoyed for the past decade.

In the June 2004 issue of TILE, we interviewed many tile manufacturers to discover their outlook for the coming year, and while the majority felt positive in their overall outlook, nearly everyone mentioned that the falling dollar to euro exchange rate is a very serious concern. Throughout 2004, the dollar continued to lose ground against the euro, dropping to an all-time low in early December. Standard & Poor's is predicting that the dollar will continue to fall throughout 2005, to $1.45/euro. This would represent an additional 9 percent reduction, which represents a significant reduction in profit margins for European ceramic tile manufacturers.

This situation is compounded by an extended increase in oil prices, which climbed steadily throughout 2004, to more than $50 per barrel. This increase, which analysts predict is likely to continue for the foreseeable future, adds significantly to manufacturers' and distributors' costs, further eroding profit margins.

Despite these serious concerns, there are many reasons to believe that the ceramic tile industry will continue to grow in 2005 and beyond. Manufacturers continue to innovate, consistently increasing the technical performance, versatility, and aesthetic qualities of tile; consumers have responded by increasing their consumption of ceramic tile, a trend that is likely to continue.