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

Furniture World Magazine

Following an astounding 6 percent increase in the final quarter of 1998, the US economy continued to expand during the first half of this year, albeit at a somewhat slower rate of 4.5 percent. Most of the economy's energy is being derived from a very strong domestic demand. In spite of this fast growth, inflation is still under control. Real growth of consumer spending also had a superb showing of 6.7 percent (annual rate) during the first quarter of this year. This was the largest increase since the fall of 1986. The good job market, rising incomes, low inflation, a booming stock market and low interest rates have been supporting consumers' confidence. Residential construction doesn't show any signs of slowing yet. Sales of existing homes in the US totaled 5,378,000 units in 1998, the highest level in over 25 years. During the first quarter of this year, the seasonally adjusted annual volume for new housing starts was 1,766,000 units. If this pace continues, 1999 will become another record year. The favorable economic conditions will likely prevail for the remainder of this year, albeit at a somewhat slower pace. Looking to the second half of 1999, some of the forces driving consumer spending may wane. The Federal Reserve Board may start to raise interest rates any time. Consumer confidence is bound to recede if falling equity prices take a bite out of households' wealth. We anticipate that consumer spending growth will fall to 2.4 percent in the second half of 1999 and 2,3 percent in 2000. In 1998, Americans purchased furniture and bedding valued at $ 57.9 billion. The corresponding figure for the first half of this year exceeded the 60 billion dollar mark (at annual rates) for the first time. For 1999 as a whole we anticipate a market value of $ 61.7 billion, or 6.5% above the 1998 value. As inflation was very minimal, most of this growth – that s 5.7% – represents a real (constant dollar) increase. Toward the end of this year and in 2000, growth is likely be somewhat slower at an estimated 4.2%, or 3.3% after deducting the impact of inflation. This would bring the market valuation to $ 64.2 billion next year. For more information on AKTRIN research and AKTRIN reports contact aktrin@aktrin.com