- change ups
Office furniture industry index dips slightly
The quarterly MADA/OFI Trends Survey is a unique tool that is designed to measure the current business activity of the office furniture industry and its suppliers. This 28th edition was completed in April.
The survey focuses on 10 key business activities, with respondents rating each area on a scale of 10 (the highest) to one (the lowest). The business activities are: gross shipments, order backlog/incoming orders, employment levels, manufacturing hours (overtime vs. reduced hours), capital investment, tooling expenditures, new product development activity, raw material costs, employee costs, and the respondents’ personal outlook on the industry.
The unique element of this survey is the establishment of an Industry Index Number to quantify where the industry is currently performing. For example, an index of 100 means that things “couldn’t be better” and an index of one is “absolutely the worst” it can be. Likewise, an index of 50 means it is neutral: no change “up” or “down.”
The April 2011 overall survey index is 55.38, compared to 57.01 recorded in January 2011. The highest recorded index was 59.72 in July 2005; the lowest was 41.45 in April 2009. The average is 54.24 since the survey started in August 2004.
The April 2011 survey highlights are:
- Gross shipments measured 56.98, slightly below the 28-survey average of 57.39, and order backlog recorded 60.20, significantly above the 28-survey average of 56.60.
- The employment index decreased to 53.27, but is still above the 28-survey average of 51.37. Hours worked declined to 55.68, but is still above the 28-survey average of 55.50.
- Capital expenditures dipped to 57.20, but are well above the 28-survey average of 55.23.The tooling expenditure index also rose again in the first quarter of 2011 to 57.92, slightly above the 28-survey average of 55.67.
- New product development slipped to 64.60, but again above the 28-survey average of 63.71.
- Raw material costs fell to 39.80 compared to the 28-survey average of 43.19, and employee costs improved to 46.40 compared to the 28-survey average of 46.84.
- The personal outlook index rose to 62.00 compared to the 28-survey average of 56.62. This is the second time this Index exceeded 60.00 since July 2007.
Although only three of the 10 index values show improvement over January, they are important. Order backlog has improved, tooling is improving, and the personal outlook index continues to rise. Suppliers and OFMs both appear to share the same level of optimism. Most of the decreases are minimal and are reflective of a typical slower business climate during the first quarter. I don’t see anything to be concerned about, with the possible exception of rising material costs. All of the other index values are strong in spite of their modest declines.
The majority of the respondents concurred, as they continue to cite increased material costs, energy costs and increased health care costs as the “largest threats to the industry.”
Sixty-one percent of the responses came from executives who are the chairman, CEO, COO or president of their organization. Their suggestions and recommendations have been crucial to the improvement to this unique survey.
I think these strong indicators, beginning with the April 2010 index and followed by improvements during July, October and January, demonstrate that we are on the correct track. I think this industry has come out of this recession more rapidly than was previously predicted. However, it continues to be led by the health care and education markets, with the office market trailing behind. I expect this to continue through 2011 and perhaps into 2012.
Michael Dunlap is president of Michael A. Dunlap & Associates, a consulting firm that focuses on issues involving the working, learning, healing and hospitality environments and furniture industries. The April 2011 MADA/OFI Trends survey was sent to more than 600 individuals involved with office furniture manufacturing and suppliers from Asia, Europe, North America and South America, and from companies ranging from more than $1 billion in sales to less than $10 million in sales. The survey repeats in July 2011.