AFMA predicts slower recovery
By Jay McIntosh -- Furniture Today, December 16, 2001
CHARLOTTE, N.C. — Business won't decline quite as far this year for U.S. furniture retailers and manufacturers as earlier expected, and the recovery will start out slowly next year, according to a new forecast by the American Furniture Manufacturers Assn.
AFMA also took its first stab at 2003, predicting accelerating but still modest gains.
The new figures, presented at the AFMA Finance Division's annual Economic Outlook Conference here, update a forecast made in late October. Joe Logan, AFMA vice president of financial services, said the new prediction is based on updated statistics and a slightly rosier view of the U.S. economy's recovery next year.
In general, business growth will still feel sluggish until the middle of next year, conference speakers said.
At retail, the association now expects only a slight decline of 0.9% in consumer demand for furniture and bedding this year and gains of 1.2% next year and 3% in 2003. This is significantly better than the late October forecast, which had retail falling 4.2% this year and rebounding 3% in 2002. The figures are not adjusted for inflation.
Consumer demand, the broadest measure of U.S. furniture and bedding retail sales, is now estimated at $63.5 billion this year, $64.3 billion next year and $66.2 billion in 2003.
Manufacturers still are taking it on the chin this year, but not so hard — furniture shipments are expected to decline 10.3% in 2001 rather than the 12.8% forecast in October. Largely because the fall isn't so steep, next year's rise will be more modest, a 3.9% gain rather than the 7.2% increase predicted in October.
Total shipments are now forecast at $23.8 billion next year, nearly the same as the October number, and $25.2 billion in 2003. That's still shy of the record $25.6 billion shipped in 2000.
Speakers gave two reasons that retailers are having a smoother ride than U.S. manufacturers: Retailers have been trimming inventories after stocking up in 2000 and have been buying more imports, both factors that have them ordering less from U.S. producers.
Saul Hymans, a University of Michigan economist who directs the national forecast that AFMA uses in its model, said the United States will benefit starting next year from a combination of the Federal Reserve's interest rate cuts, the federal tax rebates and reductions, and an economic recovery in the rest of the world.
"Our forecast, then, is for a substantial economic recovery, but it ain't going to feel like it until you get to the middle of next year," Hymans said.
Industry analyst Jerry Epperson of Mann, Armistead & Epperson in Richmond, Va., said that despite this year's declines, the U.S. demographic profile has a large population of baby boomers entering their peak buying years. Moreover, their children are starting to buy furniture for starter homes, he said.
Because of those demographics, Epperson said, "This decade will be the best one our industry has ever seen."
He also said that with earnings on the rise next year, he expects a number of industry companies to pursue initial public offerings of stock, probably in the second quarter. But the window to go public will be brief, because rising interest rates in the second half of 2002 could put a damper on furniture stock prices, he said.
| AFMA forecast for 2001-2003 | |||
|---|---|---|---|
| Dollar amounts in billions of current $ | |||
| 2001 | 2002 | 2003 | |
| 1. Adjusted for inflation Source: American Furniture Manufacturers Assn. |
|||
| Consumer spending | $63.5 | $64.3 | $66.2 |
| Growth rate | -0.9% | 1.2% | 3.0% |
| Real growth1 | 0.8% | 3.4% | 3.0% |
| Factory shipments | $22.9 | $23.8 | $25.2 |
| Growth rate | -10.3% | 3.9% | 5.6% |
| Real growth1 | -11.2% | 3.1% | 4.3% |
| Wood shipments | $10.9 | $11.4 | $12.1 |
| Growth rate | -10.6% | 4.7% | 6.1% |
| Real growth1 | -11.9% | 3.9% | 4.6% |
| Upholstered shipments | $9.7 | $10.0 | $10.6 |
| Growth rate | -10.6% | 3.5% | 5.2% |
| Real growth1 | -11.4% | 2.7% | 4.1% |
| Metal & other shipments | $2.3 | $2.4 | $2.5 |
| Growth rate | -7.6% | 2.4% | 4.6% |
| Real growth1 | -7.7% | 1.9% | 4.0% |
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AFMA forecast more optimistic
Oct 27, 2002 -
AFMA sees 4.1% shipments growth in '02
Jul 28, 2002 -
AFMA scales back growth projections
Dec 15, 2002
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