A slowdown from '87

By Jerold Tuft President Schlage Lock Co.

EING an election year means that in 1988 few changes will occur in our federal government's economic policies. Interest rates are I nearing their peak and should remain at their year end 1987 level. Unemployment will remain under 60/0, as the manufacturing sector rebounds and the service sector continues to expand. The federal spending deficit will continue to be a problem, feeding fuel to the smoldering inflation fire.

Another major concern is the persistent un-improvement in the U.S. trade deficit. The weak dollar has made domestic goods more attractive in foreign markets but is just

Story at a Glance

Hardlines dealers face increasing competition the challenge is to determine who is the customer, what does he want. regional factors increasingly important.

must remain flexible and willing to change wherever there is the need to attract new customers. The third element, manufacturers, must also support their two-step distribution network by remaining flexible and cooperating closely to develop programs and provide quality merchandise at competitive prices.

The winners in the hardware/ home center industry surely will be those who have prepared themselves to manage change through regionalized support from their primary distributor.

beginning to curb the flow of imports to the U.S. The deficit should improve in 1988 as the expanding world economy supports American exports.

New commercial construction will be slightly down from '87 levels due to past over-building and weak underlying demand in most major markets. Construction of new single

Story at a Glance

Few changes in election Year unemployment under 67o . fewer single familY starts ... products used in new construction will be down... strong growth in rePair and rehab products.

family housing units will be below the '87 level due to higher interest rates. The decline will be softened by a strong underlying demograPhic demand. Multi-family housing will remain depressed due to past overbuilding and slow absorption rates. Sales of existing housing will be below '87 levels but remain around 3.3 million units due to a continued demand for upgraded housing from existing homeowners.

How does all this effect the demand for building products? The need for products used in new construction will be down from 1987 levels. Demand for products used in the repair and rehab areas will experience strong growth. New owners have a tendency to fix uP and improve their newly acquired properties within two years of purchase; thus the strong real estate market of the past two years will carry over into 1988. The retail/d-i-y and the commercial retrofit channels will benefit from this growth.

In summary, 1988 should be similar to 1987, but could be our last good year for awhile as short comings in past economic policies catch up with the U.S. economy.

ue srRlNG of tbur consecu- I tive years of record demand for lumber in the U.S. will likely end in 1988. But market conditions should remaln posltlve for western lumber producers next year.

The U.S. is expected to use a record 50.1 billion board feet of softwood lumber in 1987 , 5.30/o more than the prevlous year.

Much of the gain can be traced to the unprecedented demand for lumber in the repair/remodeling market. Some l5 billion feet of lumber. 310/o of total consumption, will be used in repair and remodeling in 1987. This market has nearly doubled in volume in the past decade and all indicators are that it will remain a maior user market for lumber products.

Western lumber manufacturers have been the chief beneficiaries of the improved demand in 1987. Sawmills in the West's Coast and Inland regions should ship 21.8 billion feet to domestic and foreisn markets this year, 9.50/o above l9E6 levels and the highest annual volume since WWPA began keeping