SOLID HOUSING MARKET FUELS SALES
By Staff -- Industrial Distribution, 5/1/1998
With housing starts stronger than many expected this winter, the outlook for power tool sales remains bright for the year.Housing starts in February jumped six percent from January nationwide, adding new momentum to a robust market. The health of the power tool industry is closely linked to new home construction, which reached 1.6 million units in February.
Not all areas of the country benefited from milder weather, of course. Heavy rains in the West and Northwest led to a 7.9 percent decrease in housing starts that month, while mild weather in the Northeast led to a 14 percent boom, according to the Commerce Department.
Members of the Specialty Tools and Fasteners Distributors Assn. remain upbeat for 1998 and predict an overall 8 percent sales gain for the first quarter, according to a members' survey. Distributors report that their 1997 sales rose 9.5 percent, meanwhile. Fourth quarter sales in 1997 rose 9.2 percent to mark the 23d consecutive quarterly increase over the previous year's results.
"As long as they keep building houses like crazy and interest rates stay low, the outlook for 1998 is very bright,'' STAFDA executive director Morrie Halvorsen says.
Florida, Louisiana and Texas are among the states where housing starts continue to be strong, says Bob Shuzlas, marketing director at Senco of Florida, Inc., a fasteners and tools distributor. He believes Utah will also stay upbeat led by construction for the 2002 Winter Olympic Games in Salt Lake City.
STAFDA president Dale Guenther, vice president of Lincoln Contractors Supply in West Allis, Wis., says low unemployment and mild weather helped his business grow. During the first four months of the company's fiscal year sales were already up 13 percent compared to the year before. "It bodes well. It was an easy winter,'' he says.
Guenther sees challenges ahead in his territory, however, most notably the openings of the first two Home Depot franchises in Wisconsin. "We're seeing some impact on margins,'' he says. "I'm waiting to see if the impact will lessen a few months after the big splash."
Others are waiting for the economy to finally slow down. In another measure of activity, the value of new construction contracts dipped 1 percent in February -- a result of slumping residential building (El Nino in the West) and steep drops in public works projects.
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