Furniture Sales Expected to Grow Slowly Next Year New AFMA Forecast Shows Increase of 3.8% This Year, 2.4% in 2003

Furniture World Magazine

Wholesale sales of residential furniture are expected to increase 3.8% this year and continue growing slowly throughout next year, according to a new forecast from the American Furniture Manufacturers Association. The forecast shows more modest growth for this year than the association had predicted in its most recent report in October. “The new numbers are down from October largely because of the weakness we expect to see in the fourth quarter of this year and into early 2003,” said Joseph P. Logan, AFMA’s vice president of financial services. “In addition, third quarter numbers were not as strong as we had expected.” Logan added, “There are a number of uncertainties in the year ahead that dramatically affect our outlook for furniture sales. Once those uncertainties are behind us, we expect sales will strengthen beginning in the latter part of 2003 and into 2004.” Furniture shipments are expected to total $23.832 billion this year, according to the new AFMA forecast. Next year, sales are expected to rise 2.4% for a total of $24.411 billion. The forecast shows a growth rate of 4.2% in 2004. Upholstery is outperforming the wood sector this year. The forecast predicts upholstery shipments will increase 9.3% in 2002 for a total of $10.760 billion. Growth is expected to slow to 2.5% next year for total upholstery sales of $11.029 billion. Wood shipments are expected to grow only 0.1% this year for a total of $10.870 billion, then increase 2.2% next year for a total of $11.110 billion. Although lower interest rates have helped boost housing sales to record levels, furniture sales have not kept pace, as they typically do. “I’m baffled and bewildered as to why furniture sales have not been stronger,” said Walter McDowell, executive vice president of Wachovia Corporation in Winston-Salem, N.C., who was among speakers at AFMA’s Economic Outlook Conference in Charlotte last week. “There absolutely has to be pent-up demand for furniture.” In addition to the robust housing market, McDowell noted the following factors that should indicate strength for furniture sales: record numbers of Americans are employed, personal incomes are rising, the 77 million baby boomers are in their peak earning years, home ownership has increased from 63% in 1965 to 68% today, square footage of housing has increased, second home sales have increased 40% since 1995 and interest rates are the lowest they have been in many years. “All these factors make me bullish for furniture sales,” McDowell said. “I think the future looks brighter than the recent past.” Others agree. “I think things are looking up,” said James F. Smith, senior fellow and director of the Center for Business Forecasting at the Kenan Institute of Private Enterprise at the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill. In his talk at AFMA’s conference, Smith noted that a U.S. Commerce Department report released that day showed retail home furnishings sales in November were the strongest they had been in two and a half years. “The outlook is pretty darn good,” he said. “The truth is – the U.S. economy is performing about as well as anyone could expect. The recession last year was the mildest ever recorded since 1854. We should not be expecting a major expansion since the decline was not that great.” Saul Hymans, professor of economics at the University of Michigan, director of its Research Seminar in Quantitative Economics and an economic consultant to AFMA, also is optimistic. “Once we get through this soft spot, the outlook is pretty good,” he said. AFMA’s forecast is based on the current outlook for the U.S. economy that is prepared by the Research Seminar in Quantitative Economics at the University of Michigan. Hymans noted that the current forecast is based on the assumption that the United States will not actually go to war with Iraq. If the situation with Iraq is not resolved without war, the economic outlook will change, he said. The American Furniture Manufacturers Association is headquartered in High Point, N.C. – the furniture capital of the world – and represents more than 200 leading U.S. furniture manufacturers and 250 suppliers to the industry.