North American production of extruded window and door profiles rose rapidly in 2004.

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North American production of extruded window and door profiles rose rapidly in 2004. For the year-to-date, our WINDOW/ DOOR BUSINESS INDEX is running 30% higher than the same period a year ago. This rate of growth will decelerate in the coming months, but for 2004 as a whole, the Index will post a 25% gain over 2003.

Over the past 10 years, the rate-of-change curve for the WINDOW/ DOOR BUSINESS INDEX has exhibited a very clear cyclical pattern, and the distance between the peaks and troughs has averaged two and a half years. The latest data still indicate an uptrend, and the next peak in the rate-of-change curve will occur in the first quarter of 2005. Based on this cyclical pattern, and also on our expectations for a moderate decrease in residential construction activity, we expect production of vinyl windows and doors to decline 5% in 2005. But because of the strong output this year, a drop of 5% will still leave a very high level of activity in the coming months.


Demand for these products will continue to benefit from very high prices for home heating fuels, relatively low interest rates, and the sharp increase in home equity values in recent years. In 2005, these positive trends will combine with an improving job market and strengthening household income growth.

Meanwhile, extruders of plastic pipe continue to struggle with the relentless uptrend in materials costs. For the year-to-date, our PIPE BUSINESS INDEX is running 8% above the same period last year, but most of this gain occurred in the second quarter. Growth in the first and third quarters was relatively modest compared with 2003. For 2004 as a whole, our latest forecast calls for output of plastic pipe to expand 7% compared with last year.

High levels of construction activity, both residential and non-residential, will buoy the market for plastic pipe in 2005, but growth is expected to decelerate as the year progresses. The forecast is for production of plastics pipe to expand 2% to 3% in 2005.

Most of this growth will come from a continued increase in demand for HDPE pipe, both smooth-wall and corrugated. So far in 2004, our indicator for the corrugated pipe market is up 25% versus last year. Spending for nonresidential construction projects has accelerated in recent months, and this momentum will be sustained through next year. Production of non-corrugated HDPE pipe is up 7% for the year to date, and the market seems to be gaining strength. When all of the segments are combined, output of HDPE pipe will increase 10% in 2004 and at least another 6% in 2005.

PVC pipe also exhibited healthy growth in 2004, but the momentum in this segment is waning. For the year to date, the market for PVC pipe is up 7%, and our forecast for 2004 calls for an annual gain of 5%. Materials prices will decline in 2005, and this should keep demand for PVC pipe steady in 2005.

According to our SIDING BUSINESS INDEX, total domestic production of vinyl siding is up 12% so far this year compared with the same period in 2003. The rate-of-change curve for this data, a measure of market momentum, is in a cyclical uptrend that has yet to show any sign of slowing. For 2004 as a whole, the forecast calls for a gain of 12% in total output of vinyl siding.

Throughout the decade of the 1990's, the cyclical pattern in siding production correlated closely with the cyclical pattern in U.S. housing starts. This relationship deteriorated in 2003, but it appears to have developed again in 2004. Housing starts will head downward through 2005, but residential construction levels will remain elevated. The number of new houses started will decrease next year, but the total spending for alterations and improvement to existing homes will continue to expand. Homeowners who have invested in their properties have been handsomely rewarded with much lower maintenance costs and sharply higher property values. This will keep the demand for siding at high levels, but output in 2005 will register a moderate decline when compared to the total from this year. Total production of vinyl siding will decline 3% in 2005.