The slowdown in U.S. home building is spilling over into other industries whose fortunes are linked to the performance of the housing market.
As a result, economists say industries such as household appliances, wood products and cement are in for a sluggish year, with sales anywhere from flat to down slightly.
Housing starts fell in April to their weakest annual rate since 1982, and in the first four months of the year starts were 4 percent less than the total for the same 1989 period.
Recent economic data indicate that the housing slowdown is hurting other industries.
For example, output of construction supplies fell 0.9 percent in April and 1.9 percent in March, following modest gains earlier in the year. Output of construction supplies in April was 1.1 percent below its year-earlier level, the Federal Reserve said.
Shipments of major household appliances -- ranges, washers, dryers, refrigerators and dishwashers -- were off 4.1 percent in the first four months of the year from the comparable 1989 period, according to the Association of Home Appliance Manufacturers. For the year as a whole, the association is expecting a 2.6 percent decline in shipments, after a 1.1 percent drop in 1989.
Employment in the lumber and wood products industries in May was down nearly 9,000 from year-earlier levels while employment in furniture and fixtures was 12,200 below May 1989 levels, according to Labor Department figures.
DRI/McGraw-Hill economist David Wyss said "you're already starting to see signs" of the ripple effect from the housing slowdown and predicted, "you're going to see a lot more."
All industries linked to construction "are going to be soft," said Antonio Villamil, chief economist at the Commerce Department. The slowdown in housing and related industries is "certainly going to put a damper on overall growth in the economy," he said.
But that should be more than offset by gains in business investments and exports, allowing for continued modest economic growth, Villamil said.
Several private economists said it is unlikely the spillover effect from housing would be enough to cause the economy to stop expanding.
The housing sector peaked in 1986 and has been declining ever since, especially for multifamily units. Recently, the housing market has sagged particularly in the Northeast, while the Midwest has shown improvement.
The housing downturn also has been reflected in data for related industries in the last few years. In the home appliances industry, for example, shipments peaked in 1987 and declined in 1988 and 1989. Furniture industry shipments have been essentially flat for the last three years, a spokesman for the American Furniture Manufacturers Association said.
The cement business is an example of an industry that, while not solely dependent upon home building, finds its performance considerably influenced by housing market conditions.
Residential construction accounts for about 25 percent of the cement used in the country, according to William Toal, chief economist for the Portland Cement Association, a trade group representing more than 50 cement manufacturers.
The trade group is forecasting a 1.8 percent decline in shipments this year, in part because of the weakness in home building, he said.
"We don't see a lot of strength in housing," Toal said, adding that his group estimates that housing starts will total 1.34 million this year, down from last year's level of 1.38 million. A slump in nonresidential construction, particularly for offices and hotels, also is hurting the cement industry, he said.
In the wood products industry, the decline in housing is exacerbating "already severe problems related to raw material supply," said Alberto Goetzl, vice president for economics for the National Forest Products Association. He predicted a drop of 2 percent to 5 percent in consumption of wood products this year.
Goetzl said he expects profitability of the industry to "drop considerably" this year as producers are being squeezed by rapidly escalating costs and relatively flat prices for finished products. Housing market conditions, while not the driving factor, are contributing to the bleak profit outlook, he said.
Goetzl said the wood products industry has become less dependent on new housing in recent years as the share for remodeling and repair has increased. Thus, he said, the housing slump has "serious implications" but they are "not as drastic as it might once have been."
The copper industry also will be affected by the housing slowdown, particularly on a regional basis, said Paul Anderson, vice president of the Copper Development Association, an industry trade group. Copper is used in housing for wiring and plumbing tubes.
Anderson said he expects copper industry shipments to be essentially flat this year, with a decline in housing being offset by growth in other markets.
Some industries may not feel the impact of the drop in home building for some months, economists say.
Budd Bugatch, a furniture industry analyst for Ferris Baker Watts, said there is little relationship between housing starts and furniture sales, although there is a relationship between existing-home sales and furniture. Bugatch is expecting a 5.3 percent gain this year in furniture sales and a 4.3 percent gain next year.
Some economists caution that the real estate slowdown will persist and suppliers will continue to be hurt. Noting that real estate is "underperforming" the overall economy, Mickey Levy, chief economist for First Fidelity Bancorp, said, "You've got a big inventory overhang that will take a year and half to clear out."