AKTRIN'S Monitor For American Consumer Spending On Furniture And Bedding

Furniture World Magazine

The U.S. economy over the past year performed admirably. Real GDP grew about 3.9% for a third straight year. Growth in the fourth quarter of last year is estimated to have risen at a annual rate in excess of 5.5%. In 1998, 2.75 million jobs were created, bringing the total increase to over 18 million during the current economic expansion. Labor income also posted big gains. Unemployment edged down to 4.25%, the lowest since 1970 and inflation fell also to its lowest rate in many decades. High equity prices and household wealth along with strong growth in income boosted consumption at the fastest clip in 15 years. Further decrease in mortgage rates prompted a higher housing activity. Most underpinnings of the U.S. economy remain strong. Optimism of consumers and investors are sustaining spending. Nevertheless, the economy is likely to advance at a slower pace and a higher rate of inflation than last year. Less spending on housing and household durables is a reasonable prospect. Part of the rapid increase in spending has resulted from the surge in wealth associated with a run-up in equity prices that is unlikely to be repeated. Any stock market decline will restrain consumption spending. Moreover, the debt of the household sector has mounted substantially. Last year, the purchasing power of income and wealth has been enhanced by declines in oil and other import prices, which are unlikely to recur this year. The US economy is expected to expand 3% in 1999 following a 3.9% expansion in 1998. Interest rates are not likely to change within the next six months. Unemployment is predicted to remain low, averaging 4.5% in 1999, similar to last year. Inflation is also expected to remain tame. We project an increase to 2% in 1999, compared with the 1.6% rate in 1998. Household furniture consumption grew at a rate of 3.7% last year. Under the described scenario, the household furniture market will grow at a much slower rate this year, estimated to be in the 2.4% range. In the year 2000 growth may accelerate again to a rate of about 4.2%. On the basis of this prediction, the market would reach $ 59.3 billion in 1999 and $ 61.8 billion next year.