Home improvement product sales are expected to grow by 7.6% in 2004. However, that sales growth will drop to 2.3% in 2005 and slowly rebuild to 5.5% in 2007, according to research by consulting firm Global Insight. Jim Gillula, managing director of consulting at Global Insight, discussed the research results at the spring meeting of the Home Improvement Research Institute in Washington, D.C. in April.

He pointed to “incredible similarities” between the 1990 recession and current economic conditions.

“It's our expectation that the Federal Reserve will start to raise the federal funds rate at its August meeting, but we expect the pace at which they raise the rate to be less steep than last time,” Gillula said. “That should result in a tamer cycle for mortgage rates and a less severe impact on the housing market.”

Housing market activity is expected to slow, he said. Overall housing starts were up less than 1% this year, but an 8% decline is projected for 2005. Existing home sales are expected to be down next year with an overall decline of 5.7% in 2005, Gillula said.

Growth of real gross domestic product will stay above 4% in 2004 (at 4.7%), but that growth will decline to 3.6% in 2005 and to 3.5% for both 2006 and 2007, he said. Consumption will dip from a 3.9% increase in 2004 to a 2.8% increase in 2005. Increases in consumption are expected to remain below 2004 levels for 2006 and 2007. Consumer confidence improved in 2004, Gillula said.