After years of continuous decline, the U.S. major home appliances industry is likely to finally see a silver lining in 2010, thanks to the rise of consumer confidence, the recovering housing market and, notably, the start of a long-expected federal incentive program, among other factors.
“2010 will be a better year for appliances, although there's some uncertainty out there in the market,” said Mark Delaney, director of major appliance and home improvement at market research firm NPD Group Inc. of Port Washington, N.Y.
“There's some pent-up demand from most of 2009 and 2008,” he said in a phone interview, “Consumers are finally loosening up a little bit.”
For example, unit sales of major appliances during the 2009 Black Friday week grew 8 percent and dollar sales 12 percent, compared with the 2008 Black Friday week.
For the first time in history, Delaney said, retailers offered door-buster specials on major appliances this year.
“That was unique this year and it made an impact,” he said.
The latest data from the Washington-based Association of Home Appliance Manufacturers confirmed the positive trend.
Domestic shipments in the AHAM 6 category — which includes washers, dryers, dishwashers, refrigerators, freezers, ranges and ovens — gained a healthy 16.3 percent during the four weeks between Nov. 3 and Nov. 28, compared with the same period in 2008.
Consumer confidence and spending is closely associated with the housing market, another important barometer of appliance demand.
“The home appliance industry very closely tracks with the home building industry, which has suffered enormously in the past three years,” said Jill Notini, vice president of communications and marketing at AHAM. “As a result, our industry is down about 12 percent for 2009 compared with our numbers from last year.”
But the housing market has started to regain some ground. Nationwide, housing starts rose 8.9 percent to a seasonally adjusted annual rate of 574,000 units in November, the Commerce Department said.
Total housing starts will grow from 555,000 in 2009 to 697,000 in 2010, according to forecast numbers released early this year by the National Association of Home Builders in Washington. The group also predicts that new single-family home sales will rise from 379,000 in 2009 to 517,000 in 2010, and existing single-family home sales will increase from 4.6 million in 2009 to 5.4 million in 2010.
The appliance industry also is poised to benefit from the Cash for Appliances rebate program, which offers consumers a direct rebate of $50-$200 for buying Energy Star-rated home appliances.
“It was originally signed into law as an energy-conservation measure in 2005. But it wasn't until the stimulus package of [2009] that it was actually signed into law by President Obama,” Notini said during a National Public Radio program. “The money to fund it is coming from the stimulus.”
She told Plastics News in a follow-up interview: “We hope the Cash for Appliances program will spur consumer sales. That will certainly be great for the manufacturers.”
Including suppliers, the appliances industry employs at least 100,000 in the U.S., she added.
Although the rebate for appliances is not as substantial as the Cash for Clunkers program, for example, Notini believes it may still be able to stimulate demand.
“Obviously the long-term savings may be greater than the initial rebate, but the initial rebate may help convert the consumer into making a purchase,” she said. Also, retailers and manufacturers may offer additional incentives on top of the federal rebate. Some states offer a bounty for turning in older appliances.
NPD Group's Delaney had a mixed view of the rebate program. “Certainly any incentive will help,” he said, but the amount of the rebate is relatively small, and “consumers usually tend to pull back a little bit after the holidays. He was quick to add that he's fairly bullish about rising consumer demand.
Notini said it's tough to predict the true impact of the rebate program “since the timing of programs, and qualifying appliances and amounts, all vary by state.”
“Most states are opting to run programs in April, in conjunction with Earth Day,” she said, “So sometime before the Summer of 2010, I think we will have a better idea of how effective the programs were at enticing consumers back into the retail environment.”
She said AHAM would have prefer the programs to begin before April. She also encourages the industry to make consumers aware of and help them take advantage of existing programs and incentives.
The Cash for Appliances program has no requirement of domestic content. Analysts said it's difficult to predict the split between imported appliances and domestic appliances.
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