Office Furniture Takes Hit

April 15, 2003
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GRAND RAPIDS — The office furniture industry, lacking a rebound in capital spending, is now facing its third straight year of sharply declining sales.

A new forecast released this morning by the industry trade group BIFMA International calls for an 8 percent decline in industrywide shipments for 2003, from $8.9 billion to $8.2 billion, before a rebound finally begins next year.

The new outlook represents a significant downgrade from BIFMA’s previous forecast three months ago that, after two hard years of an unprecedented decline for office furniture makers, predicted a 5.6 percent increase in industrywide shipments for 2003.

The difference maker in the three months since the previous forecast is the war with Iraq, BIFMA Executive Director Tom Reardon said.

After showing signs of stability, industrywide orders began to tail off again in December as the talk of war heated up. The effects of the war on business spending, a key indicator for the industry’s fortunes, was far larger than expected.

The trend has yet to reverse itself, Reardon said.

“We kind of felt that we were riding in the valley, but things turned down in December and they stayed pretty subdued in the first quarter,” Reardon said.

A year that was supposed to start out with a 2 percent decline in first-quarter shipments actually experienced a 12 percent drop from the January-to-March period. The larger-than-expected quarterly slide started out the year with the industry “in a much deeper hole than anticipated,” resulting in the new outlook for the year showing another annual sales decline, Reardon said.

BIFMA’s new forecast, from the economic consulting firm Global Insight, “does not envision a significant change” in order or shipment volumes during the second quarter. A further decline is anticipated for the third quarter before shipments flatten out in the fourth quarter, according to Global Insight.

The firm sees “a fairly significant rebound” in 2004 as corporate capital spending finally turns around and results in annual sales growth for the first time in three years.

Office furniture industry sales peaked in 2000 at $13.28 billion. Since then, the industry has been in steady decline, as the sluggish economy caused businesses to pull back capital spending plans.

Sales in 2001 fell 17.4 percent to $10.97 billion, and then another 19 percent in 2002 to $8.89 billion. The unprecedented decline has resulted in the loss of thousands of jobs in West Michigan, as well as plant closings locally and across the country.               

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