Ceramic Tile Industry Continues to Grow Despite Rising Manufacturing Costs
Without a doubt, the continued strength of the housing market has been the greatest driving force in the U.S. economy, which enjoyed growth in several key areas during the past year. New home sales during July rose 6.5 percent over June, reaching a record level. The remodeling sector also continued to grow during the second quarter of year, according the National Association of Home Builders. There is also positive news in the commercial segment of the market, which appears to be recovering from an extended downturn in business.
Despite the good news from the housing sector, there remain several serious areas of concern for those in the ceramic tile industry. Chief among these concerns are rapidly rising energy costs, particularly oil, which recently reached an all-time high of $68 per barrel. The potential consequences, both direct and indirect, of increasing oil prices could be significant; increased expenses to manufacture and transport all types of consumer goods, including ceramic tile; a decrease in consumer spending as transportation costs account for a greater percentage of income; and a slip in consumer confidence levels. Eventually these factors could result in another slowing of the economy, or in the worst-case scenario, a recession.
Another important concern for the industry is the relationship of the dollar to the currencies of tile manufacturing countries, particularly those which are members of the European Union. According to figures from the Department of Commerce, the dollar lost a total of 19 percent in value against the euro between 2003 and 2005, which significantly impacted the profit margins of major manufacturers from Italy and Spain. Conversely, the dollar gained 17 percent in value against the Brazilian real, which helped to spur that country's growth in U.S. market share. A recent weakening of Euro in relation to the dollar suggests that this trend may slow somewhat in the next year.
Regardless of the factors which may negatively impact the ceramic tile industry in the coming year, consumer demand for all types of tile continues to grow, and retailers remain optimistic about ceramic tile sales for the coming year, suggesting that the tile industry will likewise continue to grow.