HIGH POINT — As a group, furniture retailers will tread water for much of 2002, according to Furniture/Today's consensus economic forecast. Manufacturers are expected to see a significant sales gain, but only because they suffered through a much worse downturn in 2001.
Neither segment is expected to quite recover to its 2000 sales level this year.
After a 2.5% decline last year in consumer spending on furniture and bedding — the broadest measure of sales in all retail channels — spending is expected to inch upward by 0.4% this year. Adjusted for modest price inflation, the 2002 level is projected to be absolutely flat with 2001.
Manufacturers are expected to fare better, with a sales gain of 4.3%, or 4.1% in inflation-adjusted dollars. That will fall far short of making up for U.S. producers' estimated decline of 10.1% last year.
This year may be more difficult than usual for economists to forecast. Into the typical mix of omens are thrown the unpredictable effects of past and future acts of terrorism, and any help from an economic stimulus package that Congress is debating.
But in keeping with President Bush's call for Americans to live our normal lives, the analysts surveyed by Furniture/Today continue to focus on the historically most accurate predictors of the industry's health — housing activity, consumer confidence, the employment picture and income growth.
Based on such factors, the panel believes the industry is heading out of its first recession in nine years. While the economy and the industry may already have hit bottom, the panelists expect the real rebound to begin in the second or third quarter of 2002 and to continue into the following year.
After the 0.4% rise this year, U.S. consumer spending on furniture and bedding is expected to increase 2.6% in 2003. Much will depend on what happens with consumer confidence in an atmosphere of higher unemployment and whatever terrorism threat may be perceived.
"The consumer has got to feel better about his own situation. The stock market has got to stabilize, unemployment news … needs to be more positive," said Ken Smith, director of accounting and consulting firm BDO Seidman's furniture industry practice.
Strength of housing still a plus
Some analysts believe the remarkably resilient housing industry, buoyed by low interest rates, still is creating pent-up demand for furniture. The industry could benefit significantly as soon as consumers open their pocketbooks to furnish their new homes.
Faring slightly worse in the forecast than the broader, all-channel spending number is the furniture store segment. In current dollars, furniture store sales are estimated to have declined 2.8% last year, with another 1% dip predicted for this year before a 3.3% recovery in 2003.
U.S. manufacturers — buffeted not only by the soft economy but by swings in retail inventories and growth in imports — felt the brunt of the industry's swoon last year with the estimated sales decline of 10.1% in current dollars. The analysts expect a rebound of 4.3% this year another 2% in 2003.
Through the first half of 2001, furniture imports to the United States grew 3% over the comparable period in 2000 — the smallest rise in years but still a gain at a time when U.S. manufacturers' sales were declining. Source countries, including China and possibly Vietnam, a new player, are expected to continue to achieve gains as long as they enjoy advantageous pricing.
"Until the dollar declines, which may not happen for four to six years, imports will grow," said economist James Smith, a University of North Carolina professor.
But Joe Logan, the American Furniture Manufacturers Assn.'s vice president of financial services, noted the University of Michigan's financial forecast does see some weakening in the dollar over time, which should work to slow the rise of imports.
