The Best Commercial Cleaning Available In Hornell, NY 14843

The Best Commercial Cleaning Available In Hornell, NY 14843

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Mixed Economic Signals and Carpet Investment

 

 

By Kemp Harr

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As we enter the third quarter, we continue to see mixed signals as to how surefooted this economic recovery is. The recent action by the Federal Reserve to delay the tapering of bond purchases would seem to indicate that it thinks the U.S. economy still needs help and is not stable enough to expand without the help of its $85 billion-a-month stimulus.Granted, the recent uptick in interest rates has appeared to cool the housing market a bit, but there are plenty of positive signs that would indicate our recovery has a relatively solid footing. Car sales in August were up 17% versus last year and are now at pre-recession levels. August jobless claims were at a six-year low, and the unemployment rate is continuing to move in the right direction.The architecture billings index for August shows improvement and indicates that companies are making plans to invest in commercial construction and renovation projects. In addition, the Conference Board’s Leading Economic Index increased in July and August after taking a pause in June.The floorcovering industry appears to be betting on continued economic expansion. In May, we saw Bob Shaw’s Engineered Floors announce that it planned to invest $450 million over the next five years. And in the last quarter, we’ve seen several other big investment announcements. Shaw Industries, which just opened its $45 million modular carpet plant in China, has recently announced additional investments of $85 million on a new carpet tile plant in Adairsville, Georgia and $40 million at its hardwood plant in South Pittsburg, Tennessee—plus an additional $100 million on new extrusion and distribution projects. Mohawk, which just last year purchased Pergo and Marazzi, has also recently committed $180 million to its Continuum Process PET carpet fiber project; Armstrong announced plans to build a $40 million LVT plant here in the U.S.; and we’re seeing major investments from the two independent carpet backing producers, with Mattex building a $60 million domestic backing plant in Georgia’s Murray County and Propex expanding its Isis capacity at its facility in Hazelhurst, Georgia. When you add this all up, the floorcovering industry is certainly doing its part to stimulate the economy.TARGETED CARPET INVESTMENTCarpet tile, LVT and polyester carpet seem to be the three growth areas that are attracting the most money. Of those three, the carpet tile investment is probably the least speculative and the one area where growth would seem to be in step with demand. In the other two areas, however, there’s a strong chance that capacity could quickly outpace demand, which would result in some interesting share shift dynamics.While Engineered Floors breaks ground on its third manufacturing plant, Mohawk is investing heavily on its PET infrastructure and Shaw is expanding its extrusion capacity. Up to this point, the market has responded favorably to these investments and consumption has shifted in the same direction as the investments. As more polyester carpet capacity has come online, polyester’s share of the residential carpet market has grown. The risk, however, is that there’s a saturation point for this type of carpet, and capacity could soon outpace demand. When Shaw Industries recently announced its latest $100 million expansion news, I was told that the new equipment could be used to produce either polyester or nylon. This isn’t the case with Mohawk’s recent expansion. Since it’s centered on converting PET bottles into carpet fiber, it would appear that this investment is totally committed to PET carpet. One wild card is whether Engineered Floors’ next level of expansion will continue to be focused on polyester carpet. One could easily assume that the company would continue to invest in the area that has brought it success, but that may not be the case.Another dynamic in this polyester versus nylon residential carpet equation is the strength of Invista’s Stainmaster branded nylon 6,6 program. Last year, we took notice at the fall National Floorcovering Alliance meeting that this powerful group of retailers (many of which are Stainmaster Flooring Centers) seemed to be questioning its loyalty and commitment to the program. One short year later, however, it does appear that Stainmaster has rejuvenated itself among these core supporters and is as strong as ever. In fact, Invista tells us that 57 of the new carpet styles introduced at this meeting featured Stainmaster fiber. It would appear that Invista has been working hard to regain this support. Not only has it updated its Ultra-life warranty but it has also won accolades from the Women’s Choice Award, which indicates that the Stainmaster brand is four times more popular among women than the next closest carpet brand. The other three brands that won votes were Mohawk, Shaw and Martha Stewart.If you have any comments about this month’s column, you can email me at kemp@floorfocus.com.

Copyright 2013 Floor Focus

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