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Furniture executives say U.S. debt deal could help

But economy's still not fixed, marketgoers say

Clint Engel -- Furniture Today, August 2, 2011

AT THE MARKET — Industry leaders offered mixed reactions Monday to the debt ceiling agreement reached by members of Congress this week, and on whether it will help move the needle for consumer furniture purchases in a positive way.

Both suppliers and retail executives qualified their comments, noting that by midday Monday, Congress had not yet voted on the proposal to raise the debt ceiling and reduce the federal deficit by an estimated $2.5 trillion over a decade.

Several said they'd expect some sort of uptick in consumer spending and confidence, but they also felt it could by short-lived because of the continuing economic troubles and weak demand. But the alternative of no deal would've been much worse, most agreed.

"It's a positive," said Oscar Miskelly, partner in Jackson, Miss.-based Miskelly Furniture. "I don't think there will be an uptick (in business) but we more or less avoided a negative."

Lack of a deal would be worse, he said, because default would have led to higher interest rates, which filter down to mortgage rates, "which would have killed any kind of recovery."

"I think any economic news that gives consumers more confidence in using money to help (improve) their standard of living is beneficial," said Steve DeHaan, executive vice president of the National Home Furnishings Assn.

He said the deal in Congress is that kind of news, alleviating uncertainty. But he said he couldn't predict how much of an effect it will have on business.

Others weren't so sure the news would translate into looser purse strings and higher consumer confidence.

"I think unemployment is more of a concern than interest rates," said Steve Barr, president of upholstery supplier Cheers/ManWah. Unemployment is still hovering around 10%, he said. "If you don't have a job, it doesn't matter what the interest rate is."

Lee Goodman, CEO of San Diego-based Jerome's, said there's no question the debt ceiling standoff was making customers more nervous.

"We have a value story and we're not moving away from that because we believe that's the model," he said. "But the customer is not listening as carefully as she had been because she's scared. When we get over this - and we will - we're still not out of the woods because the customer is going to feel good for a minute and then go back to realizing we still have a troubled economy."

Jim Ziozis, president and CEO of Linon Home Décor Products and Powell, predicted a possible "short-term positive because it will be something pleasant after a month of doom and gloom."

"But effectively the facts haven't changed," he said. "The problem truly affecting our industry is the limited disposable income the consumer has after paying for the must-have basics, which are housing/rent, food, energy, basic clothing and health, welfare and educational needs."

Another big issue left unsolved is "the huge debasement of the U.S. dollar," Ziozis added. "Everything priced in dollars is going up, and that's creeping faster and faster into the economy and the furniture industry."

Ashley Furniture Chairman Ron Wanek said the news should prove positive but won't necessarily lead to a boom in demand. He said there was a positive to the debt ceiling debate, with its focus on government spending.

"This has been very, very good because people are now understanding that there's a problem with overspending," he said. "It raised the awareness of the masses of people -people who normally wouldn't pay attention to it."

Editor-in-chief Ray Allegrezza contributed to this story.

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