The Market in 2006The U.S. ceramic tile market continued to expand and experience growth in 2006. Consumption of tile increased 1.8% last year – from 3.26 billion sq. ft. in 2005 to 3.32 billion sq. ft. Domestic shipments of tile decreased with 630 million sq. ft. shipped domestically in 2006, a decrease of 4.3% from 2005 (658 million sq. ft.).¹
Although overall total consumption set a new record, the increase in 2006 (1.8% overall) is slightly less than the 3.5% seen in 2005, due to the slowdown in the new housing market and resulting decline in overall floor covering sales. Remodeling and commercial markets, however, continued to bolster tile sales overall.
Imports’ percent share of the U.S. ceramic tile market (in square feet) continued to rise in 2006 and comprised 82.4% of the total market. This follows the trend of imports’ gaining ground over the last 15 years. Imports were 46.2% of the market 30 years ago, and in each year since 1992, they have consisted of more than 50% of total consumption.
From where is this tile coming? The top five countries from which tile was imported (in millions of sq. ft.) in 2006 were²:
- Italy – 661 - decreased 4.1% from ’05
- Mexico – 452 - increased 10.6% from ’05
- Brazil – 430 - decreased 4.8% from ’05
- China – 346 - increased 53.9% from ’05
- Spain – 346 - decreased 5.0% from ’05
- Italy – increased 0.7% from ’05
- Spain – increased 3.4% from ’05
- Mexico – increased 9.7% from ’05
- Brazil – decreased 2.9% from ’05
- China – increased 60.5% from ’05
Other statistical trends include:
- 2006 U.S. consumption of Italian tile (in sq. ft.) fell for the third straight year.
- U.S. consumption of Spanish tile (in sq. ft) decreased in 2006 for the fourth straight year.
- 2006 U.S. tile consumption from Brazil also declined, 4.8% from 2005 to 2006.
- U.S. consumption of Mexican tile increased in 2006 for the seventh straight year, up 10.6% over 2005.
- China, which accounts for 12.7% (2006) of all tile imported to the U.S., continues to make a tremendous impact on the market. It now is the fourth-largest exporter of tile (in sq. ft.) to the U.S., with U.S. consumption of Chinese tile up 53.9% from 2005.
- Imports, which comprise a large portion of the U.S. tile market, rose from 80.9% of the market in 2005 to 82.4% in 2006.
- Weaker U.S. dollar vs. Euro
- More Italian companies manufacturing in the U.S.
- In general, imports from higher-cost producing countries declined, while imports from lower-cost countries increased.
Chart 4shows the trend over the last decade of the top 5 countries from which tile was imported ( in thousands of sq. ft.).
The Market in 2007Based on first and second quarter 2007 numbers, there has been a dramatic slowdown in the tile market. Consumption, domestic shipments, and imports are all down so far this year. Total U.S. consumption through 2nd quarter 2007 was 1.37 billion sq. ft., down 19.1% from 2nd quarter 2006.
Future Indicators and Key InfluencesValue of Dollar vs. Other Currencies
The value of the Euro increased almost 10 % from 2005-2006 vs. the U.S. dollar, and has continued to get stronger in 2007. The Chinese Yuan and Brazilian Real also made gains in 2006-2007, with the buying power of dollars’ shrinking against these currencies. The dollar increased in relation to the Mexican Peso, however.
Mortgage RatesThe housing market is affected greatly by mortgage rates, which in turn influences the usage of tile. The average 30-yr. fixed mortgage rates have steadily risen from 5.87% in 2005 to 6.41% in 2006 and to 6.57% in August 2007. (Source: Freddie Mac)
PopulationThe U.S. population grew to an estimated 298 million in 2006, which is a 6.0% increase over 2000. It is estimated to increase an additional 1% (over 2006’s population) in 2007. The U.S. has the world’s third-fastest growing population (trailing only China & India), which will require an estimated 100 billion sq. ft. of living space by the year 2030.³ This will result in a higher demand for flooring products, such as tile.
Housing StartsHousing starts fell drastically in 2006, and continue to decline through 2007. The number of single-family housing starts fell 14.6% from 2005 to 2006, compared to a 6.5% increase from 2004 to 2005. The NAHB projects the slumping new home market will bottom out at the end of this year or early in 2008.4
Despite the decline in new housing starts beginning in 2006, the average size of single-family homes continued to rise to a record 2,456 sq. ft. This is a 1.7% jump over 2005 numbers and a 14.8% rise from 10 years ago, in which the average single-family dwelling was 2,140 sq. ft.5Larger homes, kitchens, and bathrooms mean more need for flooring products like tile. Note the increasing number of homes with 3,000 or more sq. ft.(Table 7).
RemodelingRemodeling especially impacts the tile industry, as the two rooms most frequently remodeled are kitchens and bathrooms, which also happen to be the two rooms in which tile is most often used. The size and number of rooms in houses continues to rise. The latest data from the U.S. Census Bureau (2005) shows that 59% of new single-family houses have 2-1/2 or more bathrooms, and 96% have at least two bathrooms.
The National Kitchen and Bath Association (NKBA) estimates that in spite of the housing market decline, the remodeling industry will remain steady in 2007. Approximately $265 billion was spent on kitchen and bath remodeling in 2006, and that number is projected to be $262 billion, slightly down 1.1%, in 2007.6
America’s aging Boomer population, with more disposable income than past generations, has fueled the remodeling market, and today’s younger generation is more design-savvy and has more money to spend on remodeling, as well.
Summary and Outlook
In spite of the current downturn in the tile industry, there are reasons for optimism. Tile was one of only three floor coverings (along with area rugs and rubber flooring) that saw an increase in sales last year. Ceramic tile also continues to gain a larger share of the floor covering market (10.6% in 2006, up from 9.6% in 2005) and is now third overall behind carpet and area rugs.7
Looking ahead to the rest of 2007, based on 1st and 2nd quarter numbers, if the current trend continues for the remaining two quarters of 2007, total consumption would be down a total of 17.2% from 2006.
GDP is predicted to grow at a 2.0% rate in 2007.8
The projected U.S. economic growth for 2008 is 2.8%. This is the lowest growth since 2002.9
New housing starts are expected to decline until at least early 2008, with sales’ not getting back to the 1.5 million level (i.e. where they were in 2003) until 2010 or 2011.10
1 U.S. Dept. of Commerce
2 U.S. Dept. of Commerce
4BUILDER Online News Service, July 25, 2007
5 U.S. Census Bureau
6 Kitchen and Bath Design
8BUILDER Online News Service, September 10, 2007
9BUILDER Online News Service, September 10, 2007
10BUILDER Online News Service, July 25, 2007