Positive outlook projected for marine businesses.
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. However, 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. These businesses were in the black due to investing in state-of-the-art equipment, lean/quality improvement manufacturing practices, training staff, and developing and marketing innovative products targeted to customers.
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.
Growth in marine sales projected
New boat unit sales increased 5 percent in 2015, and 8–9 percent in terms of value. New boat unit sales in 2016 have a good chance of growing 6–8 percent compared to 2015. Pre-owned boat sales were up 6 percent in 2014 compared to 2013. Marine aftermarket accessories sales reached $5.6 billion in 2014, an increase of almost 15 percent from the previous year.
Developments in 2015 supporting future growth in the marine fabric market:
- A steady U.S. economy with GDP achieving 2.2 percent growth from 2014
- A noticeably improving housing industry
- A stronger job market—unemployment rate at 5.3 percent in 2015 vs. 6.2 percent in 2014
- A consumer confidence index above 90 for 14 straight months—a figure that historically correlates to a well-performing marine fabric industry
- Consumer spending above 2.5 percent
- Low oil and gas prices in 2015 and 2016
Low fuel prices are expected to continue through 2016, bolstering people’s financial outlook, which bodes well for new boat sales and pre-owned boat sales. Continued growth in recreational boating is projected to last until at least the middle of 2018. More people in the U.S. are taking to the water; some 89 million Americans went boating in 2013. Reportedly, 90 million people participated in recreational boating at least once in 2015.
Positive outlook for the marine market
Sales, in terms of volume, in the 2015 U.S./Canadian marine fabric end product market grew 7 percent to 26.6 million square yards. Sales are projected to grow another 7 percent in 2016—reaching 28.5 million square yards. Gradual improvement in the U.S. and world economy in 2016 will be a key driver in fueling this growth, as will the strong 6–8 percent growth in new boat sales in 2016, underpinned by a 2 percent growth in pre-owned boats and the re-cover market.
The Conference Board’s consumer confidence index, a key barometer for growth in the marine fabric market, averaged 97.9 in 2015, up 11 points from 2014. This marks the fifth year of increases in a row since IFAI began tracking these figures. This growth is expected to continue into 2016; in general, a consumer confidence index of 90 or more means increased consumer spending—especially in the marine fabric market. 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.