At a national conference in October, forecasters predicted flat to falling housing starts in 1998. But some indicators show North American plastics companies in the construction products market still may have room to grow this year.
The National Association of Home Builders predicts 1.38 million housing starts in 1998, down 4.8 percent from 1997's projected figure of 1.45 million.
But the most recent statistics from the Census Bureau hint at a housing market that refuses to die down. Both housing starts and housing permits — which give a glimpse at construction activity one to two months down the road — were up in November, according to a Dec. 16 news release from the bureau.
The Census Bureau said November's housing starts equaled a seasonally adjusted annual rate of 1.53 million — up 3 percent from the November 1996 rate.
And housing permits issued in November climbed 4 percent from 1996 figures to an annual rate of 1.49 million.
The Census Bureau collects permit numbers only from those areas where building permits are issued, so they don't provide a full glimpse of the national housing picture. Also, it does not follow up the permit data to check the correlation between one month's permit numbers and another month's housing starts, a staff statistician said.
Plastics companies also are making their own assumptions about the economy.
``We're looking at housing starts being less than 1.41 million, a slight drop from 1997,'' Rod Matthews, vinyl siding business manager of Toledo, Ohio-based Owens Corning said in a Dec. 16 telephone interview. ``Single-family starts are roughly around [1.1 million] or so in '97. In '98 they will be about [1.05 million], we're predicting.''
Better news for Matthews' side of the business is the amount of money spent on home improvements and repairs.
``Home improvement has been on a steady increase since 1991,'' Matthews said. ``People [in the United States] spent $140 billion on home improvement in '97, and we're expecting them to spend $150 billion in '98.''
Dayton Technology's Bill Uhl also predicts increased sales for replacement windows, offsetting slightly lower housing starts in 1998.
``Shipments of all types of residential windows in 1998 will be down about 1 percent from 1997,'' said Uhl, director of corporate development and planning for the Monroe, Ohio-based window extruder.
``Demand for custom-size windows for replacement should improve over a somewhat disappointing 1997,'' he added. ``Overall, my prediction is that vinyl-window shipments will increase 7 percent in 1998.''
The most recent resin statistics from the Washington-based Society of the Plastics Industry Inc. could help justify optimism from Matthews and Uhl.
SPI's latest numbers, representing North American resin sales through October, show PVC used for siding and pipe grew 4.4 percent and 3.7 percent, respectively. Resin sales for windows and doors grew 37.7 percent over 1996.
One uncertain factor for the economy is the economic turmoil in Asia. One economist, David M. Jones, vice chairman of government securities dealer Aubrey G. Lanston & Co. Inc. of New York, predicted the United States will suffer as its major sources for exports in the Far East suffer. Jones had been predicting a 2.6 percent increase in the gross national product in 1998, but revised that to 1.75 percent. That's down from an estimated 1997 growth rate of 3.7 percent.
The positive news from Asia — at least for plastics processors — is that prices of raw materials could come down, said Joel Popkin, senior editor of the Journal of Asian Economics and president of Joel Popkin and Co., a Washington economic consulting firm.
``We do see a considerable weakness in material prices,'' Popkin said. ``Throughout the economy we continue to see pressure from the rest of the world [on materials pricing]. There are an awful lot of petrochemical plants going up in China and Southeast Asia. More and more of the output of those plants is going to seek buyers in U.S. markets.''
The construction industry could be doubly blessed by Asia's suffering, Popkin said.
``A lot of the price developments that should occur there should lower U.S. import prices and help keep U.S. inflation under control,'' he said. ``That should give the Federal Reserve [Board] a lot more latitude in setting monetary policy.''
That means the Fed could keep interest rates low — a key ingredient in stimulating home buying.
Plastics also may benefit from more spending in construction sectors not normally associated with the industry.
Polyphalt Inc. of Toronto, for example, is trying to grow the polymer-modified asphalt business, according to Larry Firmin, vice president of marketing.
Polyphalt, which licenses technology that adds plastic and rubber compounds to asphalt to improve its performance, is in the process of bidding with contract partners on major road work in Utah, according to Firmin. Polyphalt also sees a market for its systems in the asphalt shingle industry.