Economic Development and Manufacturing

Office furniture recovery remains strong

Dunlap April data is down slightly from the two previous surveys.

May 8, 2015
| By Pete Daly |
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Citing “extraordinary” new product development, Michael A. Dunlap has reported his survey of the office furniture industry in April is close to the previous two in October and January.

“The industry continues to move on a very steady and a solidly improving trend line. This is very good news,” said Dunlap, of consulting firm Michael A. Dunlap & Associates.

“The overall index continues to remain strong and is well above 50,” he said.

Forty-three surveys have been done since summer 2004; the latest one is definitely above the average in terms of a positive forecast for the office furniture industry, according to Dunlap.

“We re-affirm our prediction that the industry remains on course to achieve its best year in more than a decade,” he said.

The MADA/Office Furniture Industry Trends survey poses a series of questions to industry executives on 10 business activities. Answers are compiled as averaged index scores, with the overall April 2015 index score at 56.8, compared to 57.26 in January 2015 and 57.58 in October 2014.

A score of 50 in response to a survey question indicates the respondent does not see any change in that particular business activity. Higher than 50 indicates a change for the positive; lower than 50 is a worsening situation.

In the latest survey, Gross Shipments was pegged at 58.48, higher than the overall average of 57.65. Order Backlog dipped to 55.45, slightly lower than the overall survey average of 56.69.

The Employment Index of 53.03 is higher than the overall average of 52.18, and Hours Worked Index was 55.00, nearly equal to the overall average of 55.37.

Capital Expenditures slipped to 57.88, compared to 58.06 in January. Tooling Expenditures were steady at 57.57, compared to 57.78 in January. These compare to their long-term averages of 55.44 and 55.79.

New Product Development soared to 69.70, according to Dunlap. The previous all-time high was 66.41 in October and was well above the overall average of 63.58.

Raw Material Costs improved slightly to a neutral 50.00, compared to 49.71 in January and 45.13 in October. The overall survey average is 44.47.

Employee Costs improved to 48.94, compared to 45.28 in January and 44.25 in October. The long-term average is 46.72.

The Personal Outlook Index, which measures how each executive views the market, was 68.45, compared to the January score of 66.32, the highest since the survey began in 2004. The Personal Outlook in October was 64.15, compared to the long-term average of 57.48.

“The declines in several index values are not very significant,” said Dunlap. “All have been improving since the first half of 2013, and the large increases during the third quarter of 2014 are not a common occurrence. The fourth quarter remained strong and the strength of the first quarter of 2015 reflects a pattern of solid improvement. The Employment Levels and Hours Worked index values remain very steady and are indicative signs that hiring of new employees is keeping up with demand” for more overtime.

The New Product Development was “extraordinary” at 69.70, he said. “Both manufacturers and suppliers continue to report similar experiences.”

According to Dunlap, the most frequently cited perceived threats to the office furniture industry’s financial success are health care costs and the cost of materials. Both are the most commonly cited concerns from respondents since the survey began in August 2004.

More than 58 percent of the responses came from the top executives within the industry.

“Three out of 10 Index values have improved and seven declined, and those that went down were minor adjustments. Only Employee Costs are below the 50 level, and Material Costs were neutral at 50.00.

“We maintain the opinion that the industry will continue to accelerate during the second and third quarters of 2015, and that 2015 will finish strong into 2016.”

The latest survey was sent to more than 800 individuals involved with office furniture manufacturing and suppliers around the world. The companies range from more than $1 billion in sales to less than $10 million in sales. The next survey will be done in July.

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