The world economy in review
Six years after the world economy emerged from the Great Recession of 2009, a return to a strong global expansion remains elusive. The downside risks to the world economy appeared more noticeable than ever in 2015. Economic growth has improved in the advanced economies—the United States, Japan and Europe. But activity in emerging and developing economies was slow for the fifth year in a row; reflecting weaker prospects in 2016 for some large emerging economies—such as China—and oil exporting countries such as Russia and Saudi Arabia.
Worldwide growth in GDP in 2015 was 3.1 percent—0.3 percentage points lower than in 2014. Growth in U.S. GDP in 2015 was down slightly, coming in at 2.2 percent—0.2 percentage points below 2014. This decrease in 2015 was due, in large part, to the strong U.S. dollar, which makes it more expensive to sell U.S. exports to foreign markets. In the fourth quarter of 2015, many U.S. companies scaled back inventory because overseas demand had weakened as economies from Europe and China to South America and Africa struggled with their own growth problems.
The economic recovery in the euro area over the past two years is continuing. Domestic demand is expected to remain the driver of the recovery, supported by progress made in terms of fiscal consolidation, low oil prices and weak but improving labor markets. GDP growth in the 19-nation Eurozone was 0.9 percent in 2014. It reached 1.5 percent in 2015 and is expected to reach 1.6 percent in 2016.
China’s economy had a rough ride in 2015. GDP growth in 2015 was reported at 6.8 percent, the weakest since 1990. Many analysts have estimated China’s GDP to be even lower, closer to 5–6 percent, well short of the Chinese government’s 7 percent target for 2015. The industrial sector has been hit hard, with the country’s northern rustbelt on the brink of a recession. From June into August of 2015, it suffered from a stock market collapse causing global and Chinese companies to lose roughly $3.9 trillion dollars in value. While China’s economy will slow in the coming years, it will still be one of the fastest growing countries among the world’s economies. China’s GDP in 2016 is expected to grow 6.3 percent.
In 2015, the United States continued on the path to sustained economic improvement, realizing consistent, gradual growth in GDP, a greatly improved job market, increased consumer confidence and consumer spending above 2 percent. Other regions across the globe—for example, China and Russia—have incurred economic slowdowns, which have constrained growth in the worldwide economy, including the specialty fabrics industry.
U.S. and world markets overview
All but one of the traditional end product market segments regularly monitored by IFAI achieved single-digit sales growth in 2015. (The military market was flat in 2015.) The marine fabrics market tops the list—growing at 7 percent. Investing in state-of-the-art equipment, lean/quality improvement manufacturing practices, training staff and developing and marketing innovative products targeted to customers have helped keep these businesses in the black.
The world market for specialty fabrics grew approximately 2.4 percent in 2015 and is expected to achieve sales growth of 2.5 percent in 2016. Constraints on global growth in the specialty fabrics market in 2015 were largely attributable to a slower growth rate of 3.1 percent in worldwide GDP. The decline reflects a striking slowdown in the economies of emerging markets like China; this slowdown was offset by strong consumer spending in the United States.
Growth in the U.S. specialty fabrics industry was about 2.4 percent in 2015, and is expected to reach 2.6 percent in 2016. That growth will depend on the continuation of a low unemployment rate between 5.0 and 5.5 percent, a continued increase in consumer spending above 2 percent and continued low oil prices.
Despite the improvements in the unemployment rate in 2015, consumers are still very cautious about spending. Still, we do expect to see a 2.7 percent increase in consumer spending in 2016, as people remain confident that the U.S. economy will continue to expand at a consistent, gradual pace.
Awnings and canopies
In 2015, growth was up 2.5 percent in the U.S./Canadian end product manufacturer (EPM) awnings and canopies market. Factors contributing to the growth included an increase of nearly 5 percent in existing home values in 2015. New home sales soared 18 percent in 2015; that momentum is expected to continue in 2016, with an anticipated increase of 20 percent. Housing starts are expected to increase by 17 percent in 2016 to 1.3 million, after an increase of 13 percent in 2015.
Many homeowners are expected to use this rising home equity to remodel their homes in 2016. According to the National Association of Home Builders Remodeling Market Index (RMI), the RMI figure for third-quarter 2015 was 57—the tenth consecutive quarter above 50. (An RMI above 50 indicates that more than half of remodelers are reporting increasing market activity.)
Construction activity increased significantly in 2015. Total U.S. construction was up 10.7 percent from 2014; residential construction was up 13 percent and nonresidential construction 9.5 percent. For 2015, total fabric consumed for awnings and canopies by U.S./Canadian manufacturers reached 29.3 million square yards—a 2.5 percent increase from 2014. For 2016, IFAI projects a 3 percent increase in fabric consumption by U.S./Canadian awning and canopy manufacturers, to reach 30.2 million square yards.
For the first time in three years, the U.S. and Canada had fairly normal weather conditions in spring 2015. The result was a longer selling season for awnings in 2015, which translated into a noticeable improvement in sales. Over the past few years, increasing sales of metal awnings has cut into sales of fabric awnings. In 2015, metal awnings represented about 15 percent of all awnings sold in the U.S.; fabric awnings represented about 84 percent, with the remaining 1 percent from other materials.
Outlook for the awnings and canopies market.
In November 2015, a survey was sent to U.S. and Canadian awning suppliers and end product manufacturers. Seventy-seven percent of respondents reported that compared to sales in 2015, the business outlook would be somewhat better in 2016. A steadily growing economy, a 5 percent increase in home values, unemployment close to 5 percent and (weather permitting) an earlier start to the selling season should lead to a 3 percent increase in sales in the U.S./Canadian awning market in 2016.
The U.S./Canadian fabric structures market experienced growth of 3.5 percent in 2015 and is expected to grow 4.5 percent in 2016. The sluggish U.S. economy is showing signs of growing beyond the dawdling-to-moderate growth of the last few years (2.4 percent in 2014 and 2.2 percent in 2015). Consumer confidence and subsequent demand continued to increase in 2015; both are expected to maintain an upward trajectory through 2016. These economic barometers signify increasing demand, a boon for the U.S. fabric structures market in coming years.
In 2015, the size of the U.S./Canadian fabric structures market was 10.1 million square yards. It is expected to reach 10.6 million square yards in 2016.
Trends and opportunities: Spurring sales in 2015–2016
- More projects occurring in infrastructure development— for example, shade structures at transportation depots, bus stops and parking lots.
- Seeing a broader umbrella of fabric structure applications—such as auto dealerships, large and small outdoor sporting events for golf and tennis, schools, parks and urban developments.
- A continuing increase in demand for engineered structures—incorporating more engineering requirements, which has also increased the costs for these projects.
- Continued replacement of aging structures.
- The quality of fabrics continues to improve—fabrics have better durability, longer life spans, and retain color longer after repeated exposure to weather and UV degradation.
Impediments to improved sales in 2015–2016
- There remain too many companies who manufacture, market and sell poor-quality fabric structures. These structures have a high propensity to fail, which has hurt the reputation of fabric structures over the years. This has improved over the last few years.
- Strict, hard to interpret U.S. building codes are becoming too prevalent; this increases the cost of business.
- Inexpensive imports of ready-made shades from Asia—particularly China.
Outlook for the fabric structures market.
In a November 2015 survey by IFAI, respondents reported that they think the U.S./Canadian fabric structures market will be somewhat better in 2016 than it was in 2015.
The fabric structures market has seen steady growth since 2012, with annual growth rates ranging from 2 percent in 2012 to a projected growth rate of 4.5 percent in 2016. Product awareness is growing as building structure customers are more and more realizing the aesthetic quality and flexibility that fabric structures provide (and that can’t be duplicated by traditional materials).
IFAI serves the global specialty fabrics industry. For this report, participants in 11 U.S. and Canadian markets were researched and surveyed.
Jeffrey C. Rasmussen is IFAI’s market research director. Contact him at firstname.lastname@example.org, +1 651 225 6967.