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AKTRIN Furniture Information Center's Forecast For Furniture & Bedding

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The American economy is still performing fairly well. Real GDP growth stood at 3.6% in 2005, only slightly down from 4.2% the year before. However, growth decelerated while the year progressed and this trend became more pronounced in the last quarter of 2005. For the next two years, GDP growth will likely remain lackluster. We predict an average advance of only 3.0% for 2006 and even less next year. Helped by an expected increase in job creation, personal income may hold up better than the economy as a whole. The growth rate stood at 5.9% in 2004 and 5.3% in 2005. It will probably continue to grow at a rate in excess of 5% during the next two years. However, if we take inflation and taxes into account, the anticipated growth rate of real disposable income will be only about 2.5%. Growth of American consumer spending stood at 3.9% in 2004, and 3.6% last year. We believe that the pace will slow down this year and next, to match the 2.5% growth rate of real disposable income The durable consumer good market is subject to erratic fluctuations as such goods are quite sensitive to consumers’ confidence and household expenditures. After growing by a staggering 10.8% in the third quarter of 2004, it descended to a meager rate of 2.6% in the first quarter of 2005 only to rise again to 10.5% in the third quarter (all rates are annualized). The average annual growth last year amounted to 5.5%. Similar to overall consumer spending, durable good consumption will grow much slower in 2006 and 2007, estimated at 2.3%. Residential construction was a very strong sector of the American economy during the past two years. Thanks to low mortgage rates, the performance remained robust in 2004 growing at an average rate of 10.3% (in value terms). The housing market is now a bit oversupplied, and growth dropped to a still respectable 7.3% last year. The slowdown in the construction sector is likely to continue for the foreseeable future with annual growth rates dropping below 3%. In volume terms, this translates to approximately 2.04 million new housing units in 2005 but only an expected 1.80 million in 2006. Furniture consumption in the USA was weak during the first three years of this century. Fortunately, the sector entered a strong recovery phase, recording a 7.9% growth rate in 2004 and 3.8% last year. In line with the growth of real disposable income, we foresee a slightly faster rate of 4.3% in 2006, bringing the market value to about $ 82 billion. ♣ Report preparted by AKTRIN FURNITURE Information Center. For more information on this report or to contact AKTRIN about a wide selection of home furnishings industry specific research reports contact aktrin@aktrin.com or visit www.aktrin.com.

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