Despite adverse weather conditions across much of the country that hampered the forward momentum of the U.S. economy in early 2014, APA – The Engineered Wood Association predicts that gradual, stable growth lies ahead in wood product sectors. Although attitudes among businesses and consumers remain cautious, recent data suggest growth will get back on track in the second quarter of 2014. APA reviewed factors impacting the market and provided an updated forecast in the recently released 2014 Market Outlook.
Real GDP is forecast to average 2.5 percent per year through 2018. This should drive up employment rates, especially among younger workers, and in turn increase household growth. Likewise, Canada’s economy is forecast to enjoy steady growth.
“Most of the market volatility caused by the housing bubble’s collapse is behind us,” said Joe Elling, APA’s market research director. “The demand for new housing units should improve over the next 3–5 years.” He said that recent statements by Federal Reserve policy makers are a positive sign that they recognize continued recovery in the housing industry as an imperative to faster economic growth.
Residential Market Forecasts
While unusually harsh winter weather dampened housing starts in early 2014, particularly in the Midwest, the market is expected to bounce back in the next 2–3 months.
One key question affecting the market recovery relates to the home-buying attitudes of a key demographic, the group of 18- to 34-year-olds who have delayed establishing their own households. An estimated 3.5 million new households could be created from this demographic, but at what point will these young adults gain the wherewithal to strike out on their own? The outlook is favorable, as employment rates within this group are on the rise. Today, renting remains a preferred option for them, but most say they aspire to eventually own a home. Both single-family and, to a greater degree, multifamily starts are projected to increase through 2018.
Signals in the remodeling market are mixed. While the NAHB Remodeling Market Index was strong throughout 2013, other measures indicate stagnation. Existing home sales, a typical indicator of the direction of the remodeling market, are expected to trend downward slightly this year and then pick up in 2015. Ultimately, APA expects repair and remodeling expenditures to grow an average of 2 percent annually through 2018.
Non-residential, Industrial, Imports & Exports
Non-residential construction continues to lag, falling 5.5 percent in 2013. Education construction is down from its high in 2008, but is expected to stabilize in 2014–2015, as the outlook for government budgets has improved. Health care facility construction has fallen due to several factors, including a decline in births since 2007 and the trend toward consolidation in health care. At the same time, commercial construction, primarily retail, is expected to grow commensurate with residential building. By 2018, nonresidential construction is predicted to be up 17 percent from 2013 levels.
Manufacturing production is likely to continue to increase in 2014, returning output to peak levels seen in 2007. Looking forward, growth should average 3.7 percent yearly through 2018, as capacity utilization increases to levels not achieved since 1999. Furniture production rose 3.2 percent in 2013 and is forecast to grow in line with increased consumer spending on furniture.
Due to rising domestic demand for North American plywood, APA anticipates that plywood imports, notably from Chile, will increase through 2018. Imports will account for 4 percent of North American plywood consumption in 2014. OSB exports were up 40 million square feet in 2013; demand for North American OSB remains strong globally, and exports are expected to increase further in 2014 and beyond.
Wood Products Expectations
Over the next 4 years, APA expects an increasing demand for North American engineered wood products; structural panels are forecast to grow 31 percent, and other engineered wood products will see growth of 40–45 percent.
Driven by a 16 percent increase in housing starts in the U.S., demand for structural panels in residential construction in North America is expected to rise 11 percent in 2014, while growth in the other end-uses is projected to be 2.5 percent. North American production of OSB and plywood is expected to hit 32.2 billion square feet in 2014, an increase of nearly 8 percent over 2013.
Glulam production is on the rise, up 11 percent in 2013, and is projected to grow 6 percent this year, to 266 million board feet, and continue to increase steadily through 2018.
In 2014, I-joist production is expected to increase to 682 million linear feet from 626 million linear feet in 2013. With steady increases in housing starts in the U.S., production is projected to reach 913 million linear feet by 2018. LVL demand will also benefit from sustained improvement in housing starts.
LVL production in 2014 is forecast to reach 62.7 million cubic feet, from 57 million in 2013, and by 2018 output is projected to grow by 46 percent to 83 million cubic feet. Industry historical data and the 2014 market forecast are provided in APA’s 2014 Structural Panel & Engineered Wood Yearbook, Form MKOE180. The report can be purchased for $250 at www.apawood.org.
About APA – The Engineered Wood Association Founded in 1933 and based in Tacoma, Washington, APA represents approximately 160 plywood, oriented strand board, glulam timber, wood I-joist, Rim Board and structural composite lumber mills throughout the U.S. and Canada. Its primary functions are quality auditing and testing, applied research, and market support and development. www.apawood.org
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