Declining Retail Sales Among Building Materials Distributors: A Time to Worry?

The recent release of the July retail sales report showed declines in retail sales for many segments of the economy, and the building materials and garden equipment and supplies segment was no different, posting a decline of almost 9.0% from the June retail sales report. While overall retail sales in the segment were still much higher than last year – a 16.4% increase over that of July 2020 – the steep fall in retail sales in the segment has people wondering if this portends a downturn in overall building construction activity.

However, it must be noted that there are a number of explanations for the decline, key among them:

• the retreat in lumber prices from their record highs seen earlier in the year – a key share of sales for many building materials retailers and distributors
• the elimination of many state-level unemployment benefits and stimulus packages – many consumers have less discretionary income and will be less likely to invest such items as home goods and lawn and garden consumables
• shoppers’ concerns about contracting the Delta variant of the coronavirus – many consumers stayed home and ordered products online or opted to delay their purchases for the time being

Retail sales by building materials and garden equipment and suppliers are expected to remain at a much higher rate compared to last year, as the bullish housing market and high level of consumer interest in DIY projects will continue to propel sales of lumber and many other construction products. However, for the rest of the year, retail sales in the segment may continue to fall, as lumber prices continue to remain at more historically normal levels and the advent of winter weather will affect construction activity, especially in the northern half of the US.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Construction and Building Products. Freedonia Custom Research is also available for questions requiring tailored market intelligence.