2004 forecast: Modest growth to continue as economy improves
By Jay McIntosh -- Furniture Today, January 11, 2004
HIGH POINT — If you liked 2003, you should be happy with this year and the next.
Furniture/Today's new consensus forecast for the U.S. furniture industry and the overall economy calls for continued modest growth. Total retail sales, reflected by U.S. consumer spending on furniture and bedding, is predicted to rise 4.1% in 2004 and 3.1% in 2005, a slight improvement on last year's estimated 2.4% increase.
U.S. furniture factory shipments, while bouncing back from an estimated 2.1% decline in 2003, are expected to lag retail growth in both years, rising 3.9% in 2004 and another 1% the following year.
Held down largely by imports and pricing pressures, projected factory shipments of $24.4 billion in 2005 will still fall short of the $25.6 billion that U.S. plants shipped in their peak year of 2000.
Furniture store sales, meanwhile — probably reflecting a shift in distribution to Wal-Mart, warehouse clubs and other channels — are forecast to grow just 1.8% this year and 1.2% in 2005.
All this is based on a U.S. economy that will be on the upswing in this election year, according to Furniture/Today's panel of contributors. The gross domestic product is expected to grow 4.7% this year, improving on the estimated 3.4% rise in 2003, while unemployment declines and disposable income rises modestly.
Inflation and interest rates are expected to stay low, and the housing industry will back off only a bit from its brisk pace of recent years.
Which isn't to say there aren't some wild cards out there.
"Terrorism, the possibility of additional wars, concern over the U.S. currency, and the election will all heavily determine the vigor of the recovery in 2004," said Jerry Epperson, an industry analyst with Mann, Armistead & Epperson in Richmond, Va.
For furniture in particular, Epperson said the key factors also include the pace of new job creation, the availability of consumer credit and the actions of the industry's retailers — they'll have to be aggressive and confident to take advantage, he said.
While it's safe to predict that furniture imports will continue to affect the industry, it's hard to say exactly how. Proposed duties on Chinese bedroom furniture might stall the growth of imports in that category, but other categories and other countries still will make imports a greater part of the U.S. product mix, panelists predict.
"Imports are definitely affecting the industry, primarily causing deflation as unit costs go down," said Ken Smith, national director of BDO Seidman's Furniture Industry Services. "We believe there will be continued growth, although not at the pace of the past few years."
He added that pricing has been affected by imports and also by lower prices on many domestic goods. Last year, the U.S. consumer price index for furniture declined by an estimated 0.4%, and the panel expects inflation of less than 1% a year in 2004 and 2005, compared with a predicted 2% annual increase in the CPI for all goods.
Wholesale furniture prices also look stable. After an estimated 1.2% increase last year, the producer price index is expected to inch up 0.4% this year and 0.2% next year.
Furniture/Today's forecast at the beginning of 2003 was right on the money with its prediction of a 2.4% increase in consumer spending on furniture and bedding for the year. It was a little optimistic regarding furniture store sales, predicting growth of 0.1% while the actual number is estimated at a negative 0.3%, and was wide of the mark on factory shipments, calling for 5.4% growth in 2003 rather than the 2.1% decline now estimated.
| Furniture industry outlook | |||||||
|---|---|---|---|---|---|---|---|
| Change from same period, prior year, current dollars | 03 avg | 04 Q1 | 04 Q2 | 04 Q3 | 04 Q4 | 04 Avg | 05 avg |
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Source: Furniture/Today Economic Outlook Survey
|
|||||||
| Furniture store sales | -0.3% | -0.8% | 2.0% | 0.1% | 0.5% | 1.8% | 1.2% |
| Consumer spending for furniture and bedding | 2.4% | 4.8% | 4.7% | 3.1% | 6.8% | 4.1% | 3.1% |
| Furniture factory shipments | -2.1% | 5.6% | 4.9% | 1.7% | 3.7% | 3.9% | 1.0% |
| Change from same period, prior year, constant dollars | 03 avg | 04 Q1 | 04 Q2 | 04 Q3 | 04 Q4 | 04 Avg | 05 avg |
| Furniture store sales | 0.1% | -1.5% | 1.2% | -0.7% | -0.2% | 1.1% | 0.4% |
| Consumer spending for furniture and bedding | 2.8% | 4.0% | 4.0% | 2.3% | 6.0% | 3.4% | 2.3% |
| Furniture factory shipments | -3.3% | 5.1% | 4.5% | 1.4% | 3.4% | 3.5% | 0.8% |
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