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Results of U.S. Architectural Coatings Industry Research Report Comparing Trends in 1Q14 vs. 1Q13

April 17, 2014

Each month, Northcoast Research surveys a large sample of paint retailers throughout the United States to get a sense for current business trends.  Please note that of the three primary architectural coatings channels (paint stores, home centers, and retail distributors), this survey is primarily reflective of the distributor channel which tends to see volume growth less than the industry; therefore, we view the results as a directional indicator more so than absolute industry volumes.  For inquiries regarding this report please contact Kevin Hocevar at 216-468-6924 or

Architectural Coatings Sales —
Volumes Up 1.8% in 1Q14 vs. 1Q13
According to industry participants, average sales volumes in October remained steady at 1.8% year-over-year following similar growth of 1.9% in 4Q13 and indicating continued momentum after seeing slightly lower growth in September.  Harsh winter weather likely tempered growth however as exterior paints significantly underperformed interior, but expectations are that this demand is being pushed into later periods and demand will accelerate once spring weather begins.  Overall, 53% of respondents witnessed an increase in volumes vs. only 16% that saw volumes decline, which averaged out to 1.8% volume growth and a net increase of 37%.

Price of Paint from Suppliers — 1Q14 Paint Prices Up Slightly vs. 1Q13
57% of contacts noted a year-over-year increase in the cost of a gallon of paint from suppliers in 1Q14 as our paint price index increased 0.8%.  This compares to a year-over-year increase of between 1.5%-2.0% throughout 2013.  We ultimately believe that the slight increase is due to continued anniversarying of recovering raw material cost inflation from when raw materials were surging coupled with price increases from manufacturers with paint stores spilling into the retail distributor channel.  We believe that pricing could potentially begin to increase in the upcoming months as 28% of respondents’ indicated that they have been notified of a price increase in the range of 1%-6%, which is meaningfully higher than has been seen in our previous reports.

Raw Materials — TiO2 Remains Stable but Still Seeing Some Declines
Titanium dioxide (TiO2) prices have been stabilizing in recent months after witnessing sharp declines in early 2013, although we have seen modest declines recently.  Additionally, propylene has been stable thus far in 2014 although pricing still remains at higher levels.  Overall, our data and recent conversations with industry contacts suggest that price increases attempted by TiO2 producers in January 2014 have been unsuccessful with no evident traction for price increases to stick until at least 2H14.  As a result, we believe that the price/raw relationship from paint manufacturers will remain favorable during the near term.

3 Month Outlook — Outlook Positive Due to Strong Paint Season Expectations
Our proprietary Architectural Coatings Outlook Index reached 0.92 during 1Q14 which marks the highest index reading since the inception of our survey.  Please note that the highest possible reading is +2 (indicating all contacts have a “very positive” outlook) and the lowest possible reading is -2 (indicating all contacts have a “very negative” outlook.  A reading of 0.92 represents a strong outlook as the busy season approaches and contacts anticipate business to accelerate as weather returns to normal patterns.  The vast majority (75%) of contacts share a positive (57%) or very positive (18%) 3-month outlook, and the remaining 25% believe that current trends will remain the same.

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