Market demand for building materials made from PVC is expected to remain in the same gradual but steady uptrend during the second half of 2017 that has prevailed for the past few years. The only wrinkle to this forecast is that this year's annual growth rates for PVC products will decelerate a bit from the relatively strong gains we enjoyed in 2016.
Indicators from the first half of this year suggest fencing and decking products are the fastest-growing segments, but they still represent a small fraction of the overall market. The largest segment of the PVC market is still the pipe sector, and the growth rate there should be solid for the remainder of this year and into 2018.
This outlook is based on the current trends in the residential construction data and also the underlying economic fundamentals that drive demand for housing such as employment levels, interest rates and new household formations. My forecast for housing starts calls for a gain of 5 percent in 2017 to a level of just over 1.2 million total units. This breaks down to roughly 800,000 single-family units and 400,000 multifamily units.
If this forecast sounds familiar, that's because it has not changed very much recently. In fact, my analyses of the residential construction sector and the market for plastics building materials in recent years have given me a whole new appreciation of the Yogi Berra-ism, "It's like déjà vu all over again."
The current phase of expansion in the U.S. economy marked its eighth anniversary in the second quarter of 2017. That makes it one of the longest periods of economic expansion in our lifetimes. But what really distinguishes the current expansion from all of the others I have ever experienced is its consistency. The economy's cruise control is pegged at a growth rate of 2 percent per year, and with few exceptions, that is what we have experienced quarter after quarter for the past eight years.
One other unusual fact about this particular recovery is that it did not start out in the typical manner.
Most all of the recoveries since World War II have been led by a strong rebound in housing starts, and until eight years ago, I would have told you that the housing starts data were the pre-eminent leading indicator of an economic expansion in this country.