Most of the end-use markets driving the demand for North American produced structural panels and engineered wood products were up in 2016. Residential construction is the primary demand driver and the news was good as single-family starts in the U.S. totaled 782,000 units in 2016, up 9 percent from 2015 and right in line with expectations in last year’s report. Demand for rental apartments remains very strong as reflected by rising rents in many urban centers. Yet, multifamily construction slipped 1 percent to 393,000 starts in 2016 as lenders were tightening their standards for construction loans through the year. Housing starts in Canada were up 1 percent, totaling 198,000 units. Residential repair and remodeling markets in the U.S. and Canada strengthened as evidenced by healthy gains in sales at building materials and supply dealers. Nonresidential construction was given a big boost driven by gains in investment that exceeded 20 percent in the office and lodging sectors.
Consumer confidence in the U.S. entered 2017 with good momentum. Employment prospects are favorable as business demand for labor continues to be very strong, as evidenced by the record number of job openings. Homebuilder sentiment is also very positive, as traffic through new housing developments has been on the rise. The rate on a 30-year fixed-rate mortgage is higher than in 2016, but at just over 4 percent, that is still very favorable. The outlook calls for single-family starts to be up 7 percent in 2017 and another 5 percent in 2018. Record low rental vacancy rates, especially in the Pacific Coast states, and continued growth in renter households are expected to prompt stronger multifamily construction in 2017 and 2018. Housing starts in Canada are projected to remain in the 190-200,000 unit range through 2018, with multifamily units accounting for almost half of all starts.
Economic growth in the U.S. and Canada is expected to run in the 2-2.5 percent range in 2017 and 2018, up from 1.5 percent in 2016. Faster growth should give a modest boost to repair and remodeling spending and the industrial markets for structural panels, such as furniture, cabinets and materials handling. Construction of new buildings and refurbishing of existing structures in the office and lodging sectors should continue to rise in the next two years. Continued penetration of e-commerce is holding down the demand for new retail stores.
In general, the character of the end-use outlook for 2017 is very similar to that reviewed in last year’s Annual Report. Therefore, there is very little change in the production outlook for 2017. The demand for APA member products should increase further in 2018 based on the end-use forecast.
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