Office furniture industry increases activity, but growth 'still quite modest'
The Michael A. Dunlap & Associates quarterly survey in October of business activity in the office furniture industry shows the highest score since October 2011, although Dunlap cautions that “it is still quite modest.”
The overall index score continues to be “well above 50” right now — 54.68 — indicating that the industry is “still on solid ground and on a positive track,” said Dunlap. His firm is based in Holland.
The survey, the 34th since Dunlap began it in 2004, measures current business activity of the office furniture industry and its suppliers. It is focused on 10 key business activities, with industry respondents rating each area on a scale of 10 down to one. 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.
The October survey shows gross shipments with a score of 60.24, compared to the overall average since 2004 of 57.76. Order backlog was 59.27, compared to a historical overall average of 56.71.
Other October scores and long-term overall averages are:
- Employment index rose to 53.37, versus 51.69.
- Hours worked rose to 58.42; versus 55.69.
- Capital expenditures rose to 54.36, versus 55.28.
- Tooling expenditures declined to 52.31, versus 55.61.
- New product development increased to 62.25, versus 63.37.
- Raw material costs slipped to 46.67, versus 43.67.
- Employee costs improved to 48.58, versus 46.97.
- The personal outlook index slipped from 55.29 to 51.19 and is below the longtime average of 56.35.
Dunlap said the continued improvements in gross sales and order backlog “are a good sign, as both had been in decline during the past two quarters. I am very happy to see the improvements in the employment or hours worked index values, as the latter is the best since January 2011. Both manufacturers and suppliers appear to be increasing their payrolls and production schedules.
“The modest improvements in capital expenditures and new product development are still below the 34-survey average, which is disconcerting to me. The decline in tooling expenditures is also of concern,” Dunlap said.
Changes in raw material cost and employee cost scores “are always a concern and rarely show much improvement. They are still above the 34-survey averages, which is good news,” added Dunlap. “The continued decline of the index in personal outlook is a bit discouraging.”
He said the majority of the respondents continue to cite increased energy costs, transportation costs, material costs, the general economy, and increased health care costs as the “largest cost threats to the industry.”