CIT''s Furniture Outlook Forectasts Long-Term Growth

Furniture World Magazine

CIT's 5th annual Furniture Outlook, released today, forecasts renewed long-term growth in the sector in 2001. In the report, CIT cites several key factors contributing to long-term growth, and highlights the dependence of household furniture expenditures on the pace of activity in the housing market, demographics and income. Other factors supporting furniture sales are continued increases in imports and expansion of exports. The current soft housing market is expected to contribute to a relatively flat growth trend in furniture buying during 2001. The report estimates a slight 0.2% rise in real shipments for 2001 following this year's record $32.26 billion. For 2002, CIT anticipates that this trend will reverse and real shipments will rise 3.4% to a new record of $33.42 billion. Furniture Sales Closely Tied to Housing Market: According to CIT, the increase in furniture expenditures is closely tied to the pace of existing home sales. There is a particularly close relationship between existing home sales and furniture sales since the majority of new furniture is purchased soon after a move. "Today, existing home sales are 3.1 times more important to the furniture industry than new home construction, up from 2.8 times in 1995 and 1.8 times from 1985," said Michael R. Paslawskyj, vice president of economic research at The CIT Group. "Going forward, we expect the importance of existing home sales relative to new homes will continue to grow." Demographics Support Furniture Sales: CIT's Outlook cites other factors influencing the household furniture market. Demographics continue to influence sales with the key buying group of households, headed by individuals 35 to 54, still growing. Despite some lag for the 35 to 45 group, the 45 to 54 segment is expanding at a vigorous 3.5% annual rate. This demographic segment has the highest median annual household income, which, combined with the overall trend among consumers to spend more time at home, is the reason why CIT anticipates real furniture shipments to move sideways next year even as the housing market moves downward. Imports Gain Marketshare: Last year imports once again took market share from domestic manufacturers, surging 23.4% to a record $10.28 billion according to Furniture Today. Today, imports account for an estimated 26% of domestic household furniture consumption, with China providing 26% of US imported furniture and Canada providing 20%. "To date, imports have done little to hurt domestic manufacturers, but the real test will come during the next economic downturn. Going forward, we expect imports to continue to expand, reaching $13.25 billion in 2002 and accounting for more than 28% of domestic demand," said Paslawskyj. Exports Slow But Continue to Grow: The report finds a decline in exports in 1999 for the first time since a minor dip in 1995. In 1999 exports fell 2.4% to $1.69 billion from a record $1.73 billion in 1998. CIT expects that a slight weakening of the dollar and rebounding foreign economies will expand domestic markets in the near future to reach $1.96 billion in 2002, 15.7% above last year's level. E-commerce: E-commerce in the furniture industry is growing, albeit slowly. Reasonable estimates of the future volume of online sales are around $3 billion. While the figure seems impressive, it is less than 4% of what will be spent on furniture at retail in the current year. While purchasing furniture over the Internet will continue to grow, it is questionable whether it will ever be a significant part of industry sales and replace good old brick-and-mortar. About CIT: CIT Commercial Services is the nation's largest provider of factoring, accounts receivable management and lending services. It is a unit of CIT Commercial Finance, one of six operating groups of The CIT Group, Inc. (NYSE:CIT; TSE:CIT.U). Founded in 1908 and with over $50 billion in total managed assets, CIT is one of the nation's largest commercial and consumer finance organizations. For more information, visit the company's web site at www.cit.com.