Furniture industry activity slowing slightly

May 6, 2012
| By Pete Daly |
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The Michael A. Dunlap & Associates survey completed in April indicates that the office furniture industry is experiencing a "very modest" decrease in activity, the second quarter in a row showing a slight decline.

The overall index based on scored data from the Office Furniture Trends Survey puts the industry at 52.62, compared to an index of 54.46 in January and 56.36 in October.

"Although we are seeing a slight decrease, it is very modest," said Dunlap. "The overall index remains above 50, and it indicates that the industry is still on solid ground and on a positive track, just somewhat slower."

The survey, the 32nd since 2004, is intended to measure the current business activity of the office furniture industry and its suppliers. It is focused on 10 key business activities, with respondents rating each area on a scale of 10-to-1. An index score of 100 is the highest possible, while a score of 1 is as bad as it can get. A score of 50 is neutral, meaning no change up or down.

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 highest recorded overall index score was 59.72 in July 2005; the lowest was 41.45 in April 2009, and the average is 54.31.

The April results, compared to the average in that category, are:

  • Gross shipments: 52.42 vs. 57.61

  • Order backlog: 50.33 vs. 56.58

  • Employment index: 50.65 vs. 51.58

  • Hours worked: 52.41 vs. 55.64

  • Capital expenditures: 55.09 vs. 55.37

  • Tooling expenditures: 54.46 vs. 55.73

  • New product development: 63.16 vs. 63.50

  • Raw material costs: 45.09 vs. 43.41

  • Employee costs: 46.21 vs. 46.91

  • Personal outlook index: 56.31 vs. 56.56

"The continued weaker gross sales and order backlog index values are of some concern to me, as both have declined during the past three quarters," said Dunlap. "I am not worried about the very slight dip in the employment or hours worked index values because both manufacturers and suppliers seem to be leveling their payrolls and production schedules.

"The declines in capital expenditures and tooling expenditures are very modest. The slight increase in new product development is encouraging," he added.

"I am excited to see the steadiness in raw material cost and employee cost index values, as they are always a concern and rarely show much improvement. Although still in the 40s, they remain fairly steady," said Dunlap.

He said the personal outlook measurement is "strong and steady" and "very encouraging."

The majority of the respondents continue to cite increased energy costs, transportation costs, material costs and increased health care costs as the largest cost threats to the industry, according to Dunlap.

Nearly 70 percent of the responses came from executives who are the chairman, CEO, COO or president of their organizations.

The recovery that began with the April 2010 index, followed by steady improvements during the past 24 months, demonstrate that the industry remains on solid footing, but is showing signs of leveling off, according to Dunlap.

"These mixed indexes and the dip in the overall index confirm that the industry is in a slow or no-growth period," he said.

Although eight out of 10 index values have declined, Dunlap said they are very modest and remain above the 50-point level.

"We came out of this recession during 2010 and 2011 more rapidly than some previously predicted. I expect the industry to remain flat through the first six to nine months of 2012, then a modest increase into 2013," said Dunlap.

The April 2012 MADA/OFI Trends survey was sent to individuals involved with office furniture manufacturing and suppliers from Asia, Europe, North and South America and from companies ranging from more than $1 billion in sales to less than $10 million in sales.

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