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Power Tool Market Analysis - Essay Example

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Summary
The housing starts projections for 2007 show that the decline that has been prevailing in the industry will continue as the estimated housing starts in 2007, as per four independent sources will be 1.581 million units (Federal Reserve Bank of Philadelphia, 2007), 1.509 million units (Realtor, 2007), 1.600 million units (Fisher, J., 2007), and 1.675 million units (Haughey, 2007).
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Power Tool Market Analysis
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1. Housing Starts The housing starts projections for 2007 show that the decline that has been prevailing in the industry will continue as the estimated housing starts in 2007, as per four independent sources will be 1.581 million units (Federal Reserve Bank of Philadelphia, 2007), 1.509 million units (Realtor, 2007), 1.600 million units (Fisher, J., 2007), and 1.675 million units (Haughey, 2007).
The difference in Housing Starts projections between the three sources is due to the fact that a projection may or may not take into account some values and parameters that may effect the outcome. Also, a projection is just a forecast of the expected future, and variations are possible in it. Finally, the difference in the estimates is not material.
The projected values represent a decline of approximately 11.5% over the last year's figure of 1.8 million units by U.S. Census Bureau. The values for the last 5 years show a continuous declining trend. The following table summarizes the historic actual values.
Year
Housing Starts (million)
2006 (November)
1.801
2005
2.068
2004
1.955
2003
1.847
2002
1.704
2001
1.602
From the above statistics, it can be concluded that the demand for power tools in this sector may not increase in 2007 as the economic activity is declining. The demand may infact decrease since lesser number of houses will be developed.
2. Expenditure for Residential Construction
The expenditure for residential construction is expected to be at $504 billion as per Realtor, and $434 billion as per Haughey, in 2007. This shows a declining trend as the last year's (2006) figures show that the expenditure was $581 billion and $608 billion for 2005 (Realtor, 2007). The actual historic data is shown in the table below (U.S. Census Bureau: 930 - Value of Private Construction Put in Place: 1995 to 2005, 2007).
Year
Expenditure on Residential Construction ( $ billion)
2005
642.276
2004
564.827
2003
475.941
2002
421.912
2001
388.324
(www.census.gov/compendia/statab/construction_housing/construction_indices_and_value)
This declining trend indicates that this sector will have less demand of power tools in 2007 than it was in prior years. This is because the expenditure for construction will decrease and power tools industry provides the tools that are used for construction. Hence, demand will be negatively affected for this market.
3. Expenditures for Residential Improvements and Repairs
The expenditure for residential improvements and repair is estimated to increase by 1.6% in 2007 as compared to 2006 (Home Improvement Research Institute, 2007). It has been $457.4 billion up to the second quarter of 2006, and was $860.8 billion in 2005. The historical values are shown below (U.S. Census Bureau, 2007). This shows that there is an increasing trend in this market.
Year
Expenditure for Residential Improvements & Repair ($ billion)
2005
860.8
2004
602.1
2003
707.0
2002
689.7
2001
627.3
(http://www.census.gov/const/C50/histtab1.pdf)
The power tools industry should prosper in this sub-sector of construction industry, as the estimated expenditure for this sector will improve over the last year's figures. Residential improvements and repairs require tools, and power tools suppliers might experience an increase in demands of their products in this market sector.
4. Expenditures for Commercial Construction
The expenditure for commercial construction is estimated to remain at $404 billion, as compared to $360.9 billion in 2006 (Haughey, 2007). The historical values are shown below (U.S. Census Bureau: 930 - Value of Private Construction Put in Place: 1995 to 2005, 2007).
Year
Expenditure on Residential Construction ( $ billion)
2005
256.694
2004
239.408
2003
226.946
2002
237.739
2001
273.922
(www.census.gov/compendia/statab/construction_housing/construction_indices_and_value)
This sector is also expected to grow in 2007 hence more demand for power tools can be expected. The power tools manufacturers should look to tap this market through proper marketing and branding of their products.
References
Fisher, J. (2007). Housing. Indiana Business Review: Outlook 2007. p 8-9.
Haughey, J. (2007, January 10). US Construction Forecast Tables - Based on Put-in Place Investments and Housing Starts. Building Team Forecast. Retrieved March 11, 2007 from the World Wide Web: http://www.buildingteamforecast.com/article/CA6406586.htmlindustryid=44206
Home Improvement Research Institute. (2007). Modest Growth for Home Improvement Product Sales Still Expected in 2007. Retrieved March 11, 2007 from the World Wide Web: http://www.hiri.org/inside.aspid=21#2
United States. Research Department Federal Reserve Bank of Philadelphia. (2006). Livingston Survey. Retrieved March 11, 2007 from the World Wide Web: http://www.phil.frb.org/files/liv/livdec06.pdf
U.S. Census Bureau. (2007). New Residential Construction. Retrieved March 11, 2007 from the World Wide Web: http://www.census.gov/const/www/newresconstindex_excel.html
U.S. Census Bureau. (2007). Construction Spending. Retrieved March 11, 2007 from the World Wide Web: http://www.census.gov/const/www/c30index.html
U.S. Census Bureau. (2007). Expenditures for Residential Improvement and Repairs. Retrieved March 11, 2007 from the World Wide Web: http://www.census.gov/const/C50/histtab1.pdf
U.S. Economic Outlook. (2007, January). Realtor Research: National Association of Realtor. Retrieved March 11, 2007 from the World Wide Web: http://www.realtor.org/Research.nsf/files/CurrentForecast.pdf/$FILE/CurrentForecast.pdf Read More
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