AFMA expects weak 4Q
By Jay McIntosh -- Furniture Today, November 11, 2001
High Point — U.S. retail furniture sales are heading down 4.2% this year and factory shipments are falling 12.8%, the sharpest one-year decline at wholesale in at least 30 years, according to the American Furniture Manufacturers Assn.'s new forecast.
AFMA expects that fourth-quarter numbers will be particularly weak, thrown off track by the Sept. 11 terrorist attacks and their aftermath.
The good news: Retail sales are expected to rebound 3% next year and U.S. residential furniture factory shipments should climb 7.2% after a "short and mild" recession.
The association says that pent-up demand created by what has been a strong housing market will fuel furniture purchases.
AFMA revised the 2000 projections downward from its previous forecast in July, which had consumer spending falling 3% and factory shipments declining 6.7%.
"The furniture industry has been struggling for nearly a year," said Joe Logan, AFMA's vice president of financial services. "And there is nothing that could have prepared us for the tragic events of Sept. 11. The terrorist acts moved the national economy into a recession, and the furniture industry has suffered further blows as well."
According to the U.S. Department of Commerce, retail sales, measured as consumer demand for furniture and bedding, were running at an annualized rate of $64 billion through August, just slightly below the $64.1 billion estimate for all of 2000.
AFMA forecasts that consumer demand in the current quarter will fall 9.5% below last year's fourth quarter, contributing to the predicted decline of 4.2% for the full year, with the total amounting to $61.4 billion. Next year's 3% gain is projected to take demand to $63.2 billion.
Much of the rebound is expected to occur in the second half of 2002, with gains in consumer demand of 7% in the third quarter and 14.9% in the fourth quarter. Pent-up demand should be a major contributor, said Logan.
"The housing market was extremely strong until Sept. 11, yet furniture sales did not keep pace. That means there are many new houses that have not yet been furnished," he said.
This year, U.S. furniture factory shipments through August were running an estimated 7% behind last year's pace, according to consulting and accounting firm BDO Seidman. AFMA's predicted 12.8% decline indicates a weakening performance in later months.
Factory shipment comparisons have been running weaker than the retail numbers all year. The disparity probably is because of a combination of shrinking retail inventories and the strength of imports, which were up 3% in this year's first half.
Shipments are expected to total $22.3 billion this year, down from $25.6 billion in 2000. In 2002, the number is expected to rise to $23.9 billion.
By product sector, U.S. factories' wood shipments are projected to decline 14.2% to $10.5 billion this year, then rise 7.3% to $11.2 billion in 2002. Upholstered furniture shipments are expected to decline 11.3% to $9.6 billion this year, then rise 6.6% to $10.3 billion in 2002.
AFMA's forecast is based on the U.S. economic outlook prepared by the University of Michigan's Research Seminar in Quantitative Economics.
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