March 5/12, 2018: Volume 33, Issue 19
Long Beach, Calif.—To commemorate Abbey Carpet’s 60th anniversary convention, Jeff Lorberbaum, chairman and CEO of Mohawk Industries, was tapped as the keynote speaker. The selection was most appropriate given that Mohawk was an original supplier to the group.
Lorberbaum told the 500-plus members in attendance to focus on increasing their success, and his first piece of advice was to stop watching the news. “Every day we hear negative stories about how politicians are arguing, calling each other names. They’re focusing on [things] that have almost no impact on us. Guess what? Democracy is a really sloppy process. Don’t let all of the political noise distract you from the good things going on in our country. In every economic cycle there are good years and bad years. We’re currently not just in good years but in the right years. Despite the gloom and doom presented in the media, every day our economy is thriving. The Great Recession has become a distant memory. Our country is in the best shape it has been in for more than a decade. Ignore the bickering you hear in Washington. Private economists are talking about GDP growth of more than 3% this year—the first time we’ve seen that level of expansion in almost forever.”
Lorberbaum also believes the recently enacted tax cuts will add to the economy and boost our economic expansion. “With the new tax law, the average person will take home between $1,000 and $1,500 more in their monthly paycheck this year. No matter how they use the money and what you hear them talking about, all the money is going to benefit our economy. If they spend it they will create greater demand for goods and services. If they put it in the bank, the banks are going to loan more money. If they invest it in the stock market, then the people selling the stocks will have more money and spend it.
“Businesses—including yours—will pay much lower taxes this year. Some will invest it by expanding their businesses. Others will develop new products; some will put automation in; some are raising employee wages and benefits; and some are distributing dividends to their shareholders. It doesn’t matter. Consumers and businesses with more disposable income will create ripples through the economy and drive our growth through every sector, including our own.”
Lorberbaum then addressed the recently passed budget, which he said had to include $400 billion of additional spending this year on both parties’ priorities. “In the short term the higher government spending will further expand the economy and fuel consumption in every building category, including flooring.”
His optimism is shared by many. In fact, The Conference Board’s leading economic indicators have been rising for months and they’re forecasting strong future growth. “Consumer confidence is the highest it has been in two decades as people embrace a more positive view of our future—people just feel safer. They feel more economically secure. They’ve become comfortable making big purchases and taking on more debt. Robust job growth is forecast for all sectors this year as the work force expands and many people return back to the labor market who haven’t worked in years. Weekly unemployment claims are near record lows, which reinforces the growth we all expect. Finally, we’re actually seeing wage growth in the lower-paying jobs in our country, which is good. With inflation limited, the workers will use the higher wages to increase their purchases of everything.”
Lorberbaum turned to the stock market for more evidence of the optimism. “The stock market’s run over the past year has created significant wealth for individuals and inspired greater confidence in the future. Even people who only own stocks in 401(k) plans are seeing their balances rising and are more optimistic. If the recent market drops have undermined your confidence, take a deep breath and look at the bond market where the higher prices suggest growth in our country’s future. If you look outside the U.S., the global market is in the best shape it has been in, with simultaneous acceleration in the U.S., European and Asian economies.”
Then we have the housing market, which should create great opportunities in the years ahead. “By the best estimates, the flooring industry in 2017 grew about 4% and further growth is predicted by everyone this year. Flooring in the past is like the overall economy. As consumers deferred purchases, which resulted in significant pent-up demand that we expect to come through, the demand is translating to greater residential remodeling, with some predicting that 2018 will set a record for home renovation spending. Overall, the real estate industry is the healthiest it has been in 30 years. Interest rates are near historic lows and even when the Feds raise the interest rates in 2018, they will still be historically low.”
The biggest challenge in the real estate market today, he said, has been a shortage of homes for sale. “Rapidly increasing demand will spark new construction as well as remodeling across the country. Remodeling drags at about 60% of the total flooring sales and probably much more for those of you in this room. So increased activity would really benefit you and our industry. Right now, investments in remodeling is being influenced by two major factors. The first is rising home prices, which is building confidence for homeowners to update and address changing lifestyles in their homes and how to make it benefit themselves. New buyers of existing homes will also customize their purchase to suit their own taste. Renewed interest in remodeling is also being spurred by television prompting home renovation on every other show. HGTV and the DIY networks have built franchises around home remodeling and their websites and magazines along with everything else are teaching consumers that updating their floors creates a trendy and refreshed home.”
Lorberbaum also cited new home construction as yet another source for optimism. “As excited as I am about remodeling, I also see growth in new single-family home construction as another sign of a healthy year ahead of us. For years, single-family home construction lagged the historical averages. After the Great Recession, we saw an emphasis on multi-family properties, but the pendulum is now swinging once more to single-family home growth. New construction must accelerate to meet current demands as expanded household formations creates added pressure to the existing market. To meet that demand, the construction industry is finally finding ways to deal with a lack of developed land, as well as taking care of the labor shortage in new ways to build more homes.
“If you take all those factors into consideration, 2018 will be rich in opportunity. The most important fact I want you to take away is that in 2018 consumers have more confidence and are going to spend more money. Together we have to convince them that spending that money in your store on new flooring is the right thing to do.”