The nation’s steadily improving housing market is boosting the manufacturing sector, driving up orders for household appliances like dishwashers, refrigerators and washing machines.
Shipments of appliances have risen steadily over the last year, as home prices have ticked upward in a sign that the economy is bouncing back after a deep plunge into recession.
“Just as housing was the main driver of the recession, it’s going to help propagate the recovery going forward,” said Tom Simons, an economist at Jefferies and Company. “There’s a lot of trickle down effects from housing, not only on the employment side. There’s plenty of appliances that need to be bought when they buy a new home.”
Overall, the economic recovery remains tepid. Unemployment is lingering around 8 percent and consumer spending has been hampered by the payroll tax increase and rising gas prices. Economists cautioned that the recent gains in housing and appliance sales were at least partly due to how far things fell after the economy imploded in 2008. But the increase in household appliance shipments is a sign that the housing market is starting to lift the overall economy.
“I do think in terms of household appliances that it’s certainly looking better,” said Sarah Watt, an economist at Wells Fargo. “Consumer spending has held up better than a lot of us thought in light of the payroll tax.”
Watt said there is pent-up demand for household appliances because cautious customers leery of the recent recession have put off purchases of big-ticket items in recent years. But as the housing market improves and homeowners get back some of the equity they lost in the collapse, significant buying power should be restored to the consumer market.
There are also signs that the housing recovery is helping job growth: the Federal Reserve recently said manufacturing firms in the St. Louis region, including those making appliances, were planning to expand their operations and hire new workers in the near future.
In 2012, General Electric added 2,500 production workers at Appliance Park in Louisville, the headquarters of GE’s Consumer and Industrial division, a company spokeswoman said.
GE has made washing machines in Louisville since 1953 and last year added a new “top loader” to its list of products, creating dozens of jobs in the process. GE has also refurbished two factories at Appliance Park that had previously been shuttered and is now making refrigerator doors and water heaters there.
Still, a company spokeswoman said GE’s expansion in Louisville had less to do with optimism about the market for appliances and more do with a “changing environment in the world.”
“Transportation costs are up so it is more expensive to source from other countries and have done a lot here to get out operational costs down,” said Kim Freeman, who is based in Louisville. “We can now manufacture more competitively in the U.S. than in the past.
Some analysts, however, are skeptical about the idea that American companies are competing better with foreign manufacturers. Alan Tonelson, a research fellow at the U.S. Business and Industry Council, which represents nearly 2,000 medium and small American manufacturing firms, recently released a report that showed that percentage of foreign-made “advanced manufacturing products” purchased in this country reached an all-time high in 2011, coming in at nearly 38 percent. And Tonelson said he’s seen no evidence that this trend was reversed last year.
“The manufacturing renaissance has not showed up in the data,” Tonelson said. “There are a whole variety of foreign government policies that rig markets here and rig markets there and that, frankly, across the board in advanced manufacturing have resulted in foreign producers growing their market share in the United States.”
Tonelson wrote in a recent blog post that domestic manufacturing had regained only 517,000 of the roughly 2.3 million jobs lost during the downturn.
Despite the sluggish job numbers, manufacturing bounced back in 2012. Shipments of household appliances made in the United States were valued at more than $1.6 billion in January, up about 4.6 percent from a year ago.
Home prices, meanwhile, were up more than 7 percent across the country last year, according to S&P/Case-Shiller index.
*U.S. Department of Commerce
*Federal Reserve Bank of St. Louis
With mortgage rates at near record lows, buyers with good credit are taking advantage and getting into the housing market. And they’re stocking their new homes with appliances.
Andrea Willits, a 32-year-old newsletter writer, and her husband, a student minister, bought a house outside Dallas in October for $160,000, trading in an apartment for a 2,300-square foot home with four bedrooms and plenty of room for their two young children.
When the Willits family moved into their new house, they bought a refrigerator at Lowe’s and purchased a new washing machine and dryer from Sears. The purchases totaled about $2,300, but Willits isn’t finished. She’s pondering a total kitchen remodel.
“When you purchase a home, I think you look at it and immediately see all the things you want to do to make it your own,” she said. “We’re going to be spending so much more money than we’ve already spent.”
Not every new homeowner has to buy appliances. When Richard Monopoli, a commercial real estate developer at Boston Properties, bought a 175-year-old colonial in Charlestown, Mass., a few months back for $929,000, he found it fully stocked with new appliances. The owner of the house had beat him to the punch, redoing the kitchen and fixing up other parts of the house major appliances to make sure it just right when he listed it. The home stayed on the market for about a week.
“It showed really well,” Monopoli said. “He did a great job sprucing it up and sold quickly.”
Monopoli, 41, got engaged last summer and thought it was time to take advantage of low mortgage rates and the tax benefits of home ownership. He took a tour of the three-bedroom home, with a yard for his five-year-old daughter, and made an offer that afternoon. Monopoli has hired contractors to make improvements to the home, including a new paint job and the installation of custom cabinets.
“When a home trades there’s all kinds of immediate ancillary benefits,” Monopoli said.
