After a shaky start in the first quarter of this year, the residential construction sector is now poised to regain upward momentum and get back on a track of steady growth.
The severe weather this past winter curtailed residential construction activity throughout most of the country, but we still expect that in 2014 the total number of new houses started will exceed 1 million units for the first time since 2007.
Not only is this good news for processors who manufacture plastic building materials, but expanding construction activity will benefit all types of manufacturing and the United States economy as well.
There are a couple of reasons for this. First, the residential construction sector is a major source of jobs in America. We all know by now that job growth has been sluggish in the U.S., and this trend must accelerate if the economy is ever going to get back to full recovery. Trends in the employment and construction data are dependent on each other.
Second, it was the bursting of the housing bubble that plunged the U.S. economy into the Great Recession six years ago. This caused a lot of structural damage to the economy from which we have not yet fully recovered.
A healthy construction sector is a prerequisite to a healthy economy in the long run. Once America is reliably and predictably building things once again, the confidence levels for both consumers and businesses will rise and the economy will be on much better footing.
We are all well aware that the construction sector has languished through a subpar performance thus far in the recovery, but there is increasing evidence to suggest that things are finally getting better. If this is accurate, then it will push demand for many types of plastics products higher.
This is true not only for suppliers of plastics building materials and parts for household appliances, but the automotive, lawn and garden, sporting-goods and packaging sectors also do better when the residential construction data are steadily improving.
There are a couple of indicators of activity levels in residential construction about which plastics processors should stay regularly apprised. Here we offer a quick overview of these indicators that are compiled and reported by the U.S. Census Bureau and our outlook for the coming year.
After a robust increase of 18 percent in the number of new houses started in 2013, there was a modest decline in housing starts in the first quarter of 2014 when compared with a year ago. Our research indicates that demand for many types of vinyl building products (siding, pipe, profiles and decking) is also down a bit in the first quarter when compared with last year.