Furniture Makers Cautiously Optimistic

August 20, 2004
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WEST OLIVE — New survey data shows executives at office furniture manufacturers and their suppliers are feeling optimistic about the future and recording higher sales as the industry recovery builds momentum.

More than half of the respondents to the survey by Michael Dunlap & Associates of West Olive reported growth in recent sales volumes.

The results confirm the sustainability of the industry rebound that began earlier this year after a devastating three-year downturn that erased a decade of sales growth for office furniture makers.

“From the data I got from the responses, I think we’re in good shape,” Michael Dunlap said. “All of the indicators are good. I do like what I see.”

Dunlap’s inaugural survey generated an index of 57.37, which is “right in the middle of the pack,” he said, on a scale that places an index of 100 as “couldn’t be better” and a 1 at “absolutely the worst” conditions.

The personal outlook of industry executives registered an index of 61.92 and is “very encouraging,” Dunlap said. A “significant majority” of the executives were either “very,” “fairly” or a “little” optimistic about the industry, he said.

Of the manufacturers and suppliers responding to the survey, more than 8 percent reported shipment increases of more than 20 percent during July over May and June. A larger percentage of respondents reported significant but smaller increases.

Overall, shipments during July were “robust,” Dunlap said.

A large number of respondents, 40 percent of whom hold senior management positions of chief operating officer or higher, reported order backlogs and incoming orders that “improved proportionately” and are “in line with” shipments, Dunlap said.

Some office furniture makers and suppliers are beginning to hire again, although half of the respondents reported no change in employment levels during the past two months.

“The employment levels are remaining very steady and with some indications of slight improvement,” said Dunlap, who plans to conduct the survey on a quarterly basis.

Dunlap’s survey also found some gains in capital investments and tooling expenditures.

And, in another indicator of improving business activity, none of the respondents reported decreases in new project and new product development activities.

The upturn in business during 2004 comes after the office furniture industry saw sales volumes plunge 36 percent over three years, from a peak of $13.28 billion in 2000 to $8.5 billion in 2003.

The industry began to turn around early this year as the U.S. economy continued to improve.

Through the first six months of 2004, industrywide shipments grew 4.5 percent over 2003, to $4.18 billion, according to the Business and Institutional Furniture Manufacturers Association.

After starting out the year with only a 1.6 percent increase during the first quarter, shipments accelerated in the second quarter to post what BIFMA Executive Director Tom Reardon termed a “very nice and healthy” 7.5 percent gain.

In an updated forecast issued in late July, BIFMA projected the industry would experience an overall 5.7 percent increase in shipments during 2004, to $8.99 billion. Business will rebound further in 2005, a robust 11.5 percent, to $10.02 billion, according to BIFMA’s latest outlook.

While much of the industry data looks positive, Dunlap’s survey did identify a couple of areas for concern in rising employee costs and higher costs for raw materials.

Rising raw material and personnel costs could affect the industry’s ongoing recovery, Dunlap said.

“That can really put the skids on things,” he said. “I would really like to see some stabilization in both.”    

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