AFMA Releases New Economic Forecast

Furniture World Magazine

The American Furniture Manufacturers Association (AFMA) has released its October edition of the Quarterly Economic Forecast to member companies. The forecast concludes that industry shipments will increase 8.4% in dollar value, up to $24,995 billion in 1999 and increase 0.9%, up to $25,230 billion in 2000. Consumer purchases of furniture are expected to increase 5.5% in 1999, tip to $61.105 billion, and grow 4.5% further in 2000, tip to $63,883 billion- Shipments of wood furniture are projected to rise in 1999 to $11.960 billion, an increase of in dollar value of shipments, and upholstered furniture is expected to total $10.503 billion in 1999, up 10.3% from the 1999 level. The forecast includes more information on many aspects of the furniture industry as well as general national economic prediction. Using the AFMA Econometric Model and projections from the University of Michigan, the Association makes quarterly predictions, of future furniture industry activity, Valuable information is provided on the following topics: the national economy, the housing market, gross domestic product, personal disposable income, interest rates, consumer purchases of furniture, manufacturers shipments of furniture. wood furniture shipments, upholstered furniture shipments, metal and other furniture and a company growth and market share analysis. AFMA is a nonprofit., volunteer organization for U.S. furniture manufacturers, with 350 corporate members representing 1,10,000 employees and more than 75% of domestic and global shipments of US, furniture Headquartered in High Point, North Carolina, the world's furniture capital, AFMA also maintains a Washington, D.C. office to represent the interests of the furniture industry on legislative and regulatory affairs to the government.   AFMA Model Predicts 8.4% Increase In Industry Shipments For 1999 AFMA's Econometric Model forecasts that industry shipments will increase by 8.4% in dollar value in 1999, reaching a total of $24.995 billion. Manufacturer shipments are expected to rise 0.9% in 2000, moving up to a total of $25,230 billion. Consumer furniture demand is forecast to be at the $6 1. 105 billion level in 1999 according to the AFMA Econometric Model, an increase of 5.5% over 1998; gains to $63.883 billion are projected for 2000. Wood (SIC 25 11): Wood furniture shipments are expected to rise 8.7% in 1999, reaching $11.960 billion, then increase 0.7% to $12.047 billion in 2000. Upholstered (SIC 2512): Shipments of upholstered furniture are expected to total $10.503 billion in 1999, up 10.3% from the 1998 level. In 2000, an increase to $10.609 billion is expected, growth of 1.0% over the previous year.   AFMA Forecast In Brief The National Economy: In most years, the economy's performance last quarter would have been considered reasonably healthy. Real Gross Domestic Product (GDP) rose by 2.3% (annual rate) for the April through June period and consumer prices increased at a 2.5% rate. However, against the buoyant economy of the past few years, this second quarter looks like a slow down. The housing sector finally reacted to rising mortgage rates and a reduction in pent-up demand, Also, during this period, the increase in oil prices began to exert some pressure on price levels. The AFMA econometric model of the furniture industry is based on the current economic outlook for the U.S. economy, which is prepared by the Research Seminar in Quantitative Economics at the University of Michigan. The current Michigan forecast calls for a continuation of the economic expansion, albeit at a slower pace; real GDP will rise. by 3.7% for 1999 but only 2.5% in 2000, Interest rates an expected to rise throughout the forecast horizon. Long term rates, measured by the rate or Moody's AAA corporate bonds, will rise from 6.5% in 1998 to 7.5% for 2000, just ahead of the 1996 level. Short rates (6 month commercial paper) are also expected to rise to 6.1% for 2000, from a level of 5.5% in 1998. The Housing Market: Housing finally hit a brick wall this spring. Housing starts fell at an annual rate of 33.0% in the second quarter. There are numerous factors that caused this slowdown, not the least of which was higher mortgage rates. The Michigan forecast expects two additional quarterly declines for starts, which will total 1.610 million units for 1999, but then fall an additional 2.3% during 2000. Sales of existing single family homes (housing resales) posted a 4.1% annual rate of growth in the second quarter of this year. However, this important sector of the housing market will register negative growth for the second half of 1999 and the first quarter of 2000. In fact, resales will rise 3.7% for 1999 but give it all back, and then some, with a drop of 4.2% during 2000. Personal Disposable Income: The increase in real personal disposable income anticipated for 1999 will mirror the 3.2% rise in 1998; for 2000, a gain of only 2.7% is expected. Consumer Prices: Though it's not time to panic, inflation of consumer goods has transitioned over to the 2 1/2 3% range, from the I -I 'A % range during 1998 and 1999. Year over year, consumer prices are expected to rise 1.7% for 1999 and 2.6% for 2000. Consumer Purchases Of Furniture: Revised U.S. government data show that furniture consumption posted a 6.2% gain in 1996, 8.3% in 1997, and 5.6% last year, The current forecast calls for an increase of 5.5% this year, but a more modest 4.5% gain in 2000 to a level of $63,833 billion. Manufacturers Shipments Of Furniture: Manufacturers' shipments of household furniture are forecast to increase 8.4% in 1999, to $24.995 billion. In 2000, shipments are forecast to rise 0.9% up to the $25.230 billion level. Wood Furniture Shipments (SIC 2511): Wood furniture is expected to finish 1999 with am increase of 8.7% in dollar value of shipments, compared to 1998, rising to a level of $11.960 billion. The dollar value of shipments is projected to rise 0.7% to $12.047 billion in 2000. Upholstered Household Furniture (SIC 2512): The upholstered furniture segment is projected to rise 10.3% in dollar value in 1999, increasing to $10.503 billion, according to the AFMA Model. Upholstered furniture shipments are projected to grow 1.0% in dollar value in 2000, reaching $10.609 billion. Metal And Other Furniture (SIC'S 2514 AND 2519): Metal and other shipments are forecast to increase 0.2% in dollar value in 1999, finishing at $2.531 billion, For 2000 growth of 1.7% in metal and other furniture is expected, with shipments rising to $2,574 billion.