New Forecast Indicates Better Times on Horizon
Jerry Epperson -- Furniture Today, December 16, 2010
This year, 2010, has been painfully odd.
First, the economy started with brisk gross domestic product growth surprising most economists. (As if that was hard to do!) Yes, about half the growth was inventory building across a large cross section of American business, but it was still good growth.
The furniture industry, which had cut back severely in 2008 and 2009, was suddenly faced with shortages in very late 2009 and into the spring. The sources had inadequate inventories to meet the demand so they geared up production here and abroad.
Second, after an encouraging beginning, the economy went limp, with the June and September quarters' economic growth averaging about 2% with 1.9% growth forecast for the December quarter. The wind was out of our sails, the economy lost momentum and new ideas were needed to stimulate our national economy.
A year that starts strong and ends weak is far from common, even if only for seasonal reasons.
Third, after shortages in the furniture industry early in the year, where are we now?
The U.S. government says retail sales of furniture and mattresses grew 4.1% in the first nine months of 2010 over the horrible, disturbing and scary first nine months of 2009. To be honest, we think the real gain is less, but who are we to doubt someone with a huge military and nuclear weapons?
Now for the fun statistics. For the first nine months of 2010, domestically manufactured wood and upholstered furniture grew 2.9% and 4.6%, respectively, in line with retail sales. Imported wood and upholstered furniture grew 16.9% and 40.9%, respectively. And these are large numbers too, because over 70% of all wood residential furniture sold in the U.S. is imported, as is about 35% of the upholstered furniture. By the way, mattress imports so far this year grew 54.7% but represented only 5% of all mattresses sold.
Where is it all going? Are we headed towards a 2008/ early 2009 retail inventory glut again?
Fourth, there is some good news on our economy. Consumer spending rose mildly in October and rose 2.8% in the September quarter, the most in four years, and savings are up to 5.7% of disposable income. Forty-one states added jobs in October and consumer confidence bounced up nicely in November.
We just completed our new, highly detailed, five-year furniture and mattress forecast. I was pleasantly surprised at the gains we should make in 2011, and 2012 may be our best year in a LONG time. Housing should see a nice recovery in the second half of 2011 and help make 2012 a much better year for us.
Hold on. It is going to get better.
W.W. "Jerry" Epperson Jr. is a managing director of Mann, Armistead & Epperson Ltd., 119 Shockoe Slip, Richmond, Va., an investment banking and research company that specializes in the furniture sector. Online at www.maeltd.com