Orlando, Fla. -- James Gillula said he expects the United States unemployment rate to fall below 6.5% by mid-year. He cautioned that a slowdown in China could impact the U.S. economy. And he expects the home improvement industry to recoup pretty much all of its weather-related losses from the hash winter.
Those were some of the macroeconomic ideas supplied by Gillula during the 2014 Home Improvement Research Institute Spring Conference held here April 10.
Gillula, the managing director of consulting services for IHS Global Insight, delivered an outlook for the U.S. economy and home improvement spending that called for increases in real consumer spending of 2.5% in 2014 and 3.1% in 2015.
Growth in the home improvement products market is expected to be even more robust, according to the IHS figures. Total sales in constant prices should increase from 3.0% growth in 2013 to 5.0% growth in 2014 (see chart).
The interest rate story, always important to home improvement marketers, is a little more complicated. IHS's reading of this, he said, is that the Federal Reserve Board will keep short-term interest rates very low until deep into 2015, but long-term rates continue to edge up. Obviously, lower rates are better, but this slow rise in 30-year mortgage rates "doesn't have to derail a housing recovery," Gillula said.
After a 19% gain in 2013, housing starts will continue their rise as demand grows. In 2014, IHS expects an 18% increase in total housing starts, and a big 34% gain in 2015. Growth in household-formation rates are driving a large part of the optimism in this metric.
Still, the 2014 forecast was reduced slightly in the past few months. Why? Part of that reduction was the result of the extra cold winter, he said. But also general cost pressures in new-home construction dampened expectations slightly.
When walking through each of the metrics and measures, the trend was for growth and general optimism. However, Gillula added: "Our macro forecasters would say, 'Walk with caution.' "
The IHS economic outlook presentation was one of seven research-oriented presentations at the HIRI Spring Conference.