In contrast to some other segments of the consumer goods sector this year, the U.S. appliance industry has managed to post only pedestrian growth of 1 percent so far in 2018. I had higher expectations for appliance manufacturers at the start of this year, but with half the year already in the books, I confess to being tempted to lower my annual outlook. At the beginning of this year, my forecast for 2018 called for growth of 4 percent in total output of domestically produced appliances.
The sluggish first-half performance notwithstanding, there is mounting evidence that demand for appliances will accelerate moderately in the second half of the year. This means that demand for plastics materials, molds and machinery needed to make appliance parts should also increase moderately in the third and fourth quarters.
I have decided to stick with my original forecast a bit longer because the critical leading indicators for this industry — housing starts and consumer spending for durable goods — are starting to show some strength. I'll admit that the downside risks to my forecast have increased, but I still expect stronger levels of business activity for appliance producers.
The graph of the rate of change in the appliance industry data shows that production levels have been decelerating for the past two years. This lackluster performance is corroborated by the data that measures retail sales at appliance stores. According to the Census Bureau, total receipts at appliance stores are up just 2 percent so far in 2018. By comparison, total sales for the entire retail sector are up more than 5 percent, and sales at furniture stores are also up more than 5 percent.
I would have expected better demand for appliances given the overall economic conditions that have prevailed during the past few months. An economic environment in which there are rising household income levels, low interest rates and steady gains in consumer spending has historically generated stronger demand for appliances.