Report shows no quick fix for U.S. housing woes

As President Barack Obama and House Republican leaders battle over spending cuts and ways to someday make a dent in the country's $14 trillion debt, recovery from the Great Recession continues at a pace that no one in the wood industry can be happy about. And while economic forecasts for 2011 begin with a bit of good news, they inevitably return to the theme that the crisis is far from over.

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The U.S. economy finished 2010 on a strong note and is positioned for further improvement in 2011, according to the Wood Machinery Manufacturer's of America's spring report, prepared by the Institute for Trend Research.

"Manufacturing has been the major growth engine in the U.S. recovery as evidenced by solid gains posted in the U.S. Industrial Production index over the past 18 months. Our outlook calls for sustained improvement in the U.S. economy over the next two years, but the momentum of the recovery will slow in the coming months.

"Retails sales are picking up as consumers begin to believe that the recovery is here to stay. We expect sales to increase at a moderate pace through 2001. The wholesale trade market is also gathering strength, showing that business owners are confident in the sustainability of the positive economic trends. One somewhat sour note comes from the housing market. The housing starts trend has deteriorated in recent months and we expect starts to remain flat with the potential to decline mildly this year, limiting new opportunities in this sector."

Housing starts ended 2010 at 587,000 annual units, a 5.9 percent improvement over the 2009 level, but still well short (-71.8 percent) of the prerecession peak level of activity, according to the report.

"The housing market found some footing with the home buyer tax credit last year, but the trend in housing starts has since deteriorated and starts over the past three months were 4.5 percent below the year-ago level.

"We expect more market decline in the near term with a recovery trend resuming around the fourth quarter of the year and continuing into 2012. It will take many years for the market to right-size and shed the excess housing stock. Therefore our forecast is for starts to stay well below what is considered the normal 1 million-plus units a year in new home building."

The Northeast, which experienced the strongest rising trend in 2010, will continue to fare better than other areas of the country.

The report forecasts minimal growth for producers of wood doors, windows and trim. "Consumers will likely be spending more on replacement products, but this will not be enough to lift millwork production ahead of 2010 levels this year."

As for veneer, plywood and engineered wood product manufacturing, the report states "production in 2011 will finish close to the 2010 level; the first half of the year will be the weakest, followed by a tepid recovery in the second half of the year."

The report also forecasts minimal growth for household furniture production.

"The household furniture production index is riding the improved consumer spending environment and slowly recovering housing market. Annual furniture production is 0.3 percent above the year-ago level and production has been mildly improving for the past nine months. Our forecast is on target and the outlook for this market is for a long period of stable to mild rise from current levels."

This article originally appeared in the May 2011 issue.