Is Furniture Growth Spurt Coming?
By Mark Sanchez

 

The office furniture industry exceeded expectations in 2004 en route to its first positive year since 2000.

 

Industrywide shipments grew 5.1 percent to $8.93 billion last year — a recent outlook had expected 4.4 percent growth — and rose 11 percent alone in December over previous-year volumes, according to the Business and Institutional Furniture Manufacturers Association. The final tally for 2004 shipments provides a solid lead-in to 2005, a year that is expected to bring higher growth rates as the industry continues to rebound.

 

The BIFMA data comes as industry executives are feeling increasingly optimistic about their firms' prospects in 2005 as indicators show business further improving, according to the latest quarterly index from industry analyst Mike Dunlap.

 

The index, based on surveys of senior executives at furniture manufacturers and suppliers, registered a score of 57.55, up from 56.16 in October. The index uses a scale of 1 to 100, which ranges from business conditions that are "absolutely the worst" to "couldn't be better."

 

Several key indicators showed improvement, according to the quarterly survey, including shipments by manufacturers and suppliers, order backlog, incoming order rates, employment levels, tooling expenses, new project activity and product development activities.

 

The improvements lead Dunlap to conclude that the office furniture industry, coming off a deep three-year downturn, could register double-digit growth for 2005.

 

"All the indicators are there. If we don't hit double-digit growth, it's going to be extremely close," Dunlap said. "Conditions are right to be able to expect that."

 

Among those indicators: New office construction, which rose a surprising 6 percent during 2004, according to U.S. Department of Commerce construction data released last week.

 

BIFMA presently predicts that industry shipments will grow 8.1 percent in 2005, to $9.6 billion. The outlook, updated Jan. 18, was based on anticipated shipments of $8.88 billion, or $50 million less than what was actually recorded.

 

BIFMA Executive Director Tom Reardon said he was surprised and pleased to see the industry exceed the 2004 outlook and finish the year with strong growth rates. In addition to shipment growth, the industry saw orders grow 6.5 percent during 2004 and 16 percent in December alone.

 

"We're pretty optimistic about this year now," Reardon said. "If everything goes as steady as she holds, we should have a pretty good year."

 

Executives responding to the Dunlap & Associates survey believe they will. They showed relatively high enthusiasm going forward, with a 63.97 personal outlook index, up from 61.88 three months earlier.

 

The rise in the personal outlook is significant and "very telling" for the industry's immediate future, Dunlap said.

 

"You've got senior management people saying, 'Yeah, I'm very enthusiastic.' That's a very, very telling statistic," he said.

 

Amid their optimism, executives continue to worry about the high costs of raw materials, although the survey did indicate some easing of price spikes for items such as steel and plastics. High health-care and energy costs, low-cost Asian competition and the declining value of the dollar were also seen as "major threats" that weigh heavily over industry confidence, Dunlap said.

"The survey confirms that the industry continues to improve," Dunlap said. "It's too bad that the higher costs of materials and health-care costs put such a damper on the otherwise positive performance."     BJX