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

Furniture World Magazine

The American economy is still advancing at a healthy pace and we expect growth for 1999 to fall within the 4 percent range. The housing market remains hot. As of July, seasonally adjusted new house sales reached 979,000, the second highest level ever. The strength in the new home market is broad-based. All regions of the country, except the West, recorded increased sales. Consumer demand also continues to cruise at a high altitude. Confidence hit a 30-year high in June, supported by a buoyant employment situation, good wage gains, low inflation, and low interest rates. Consumer spending jumped by a robust 4% in the second quarter of this year. Next year, the economy may lose some momentum and the bull stock market may come to an end. The forecast calls for GDP growth to slip to 2.3% in 2000. The Fed increased interest rates in August and more hikes are possible next year. Mortgage rates have been climbing since spring and the demand for mortgage loans fell. We do not think that the housing market has much momentum left. As consumers have persistently built up their indebtedness during the latter half of this decade, higher interest rates will not pass unnoticed. Under the described scenario, consumer demand is predicted to lag. As is typical in a slowing economy, demand for big-ticket discretionary consumer goods – such as furniture – will be affected first and to an above average extent. Nevertheless, with the economic fundamentals and consumer confidence remaining positive, we merely predict a slower growth rate and not an absolute decline of demand. While furniture consumption still advanced at a rate of 7.4% during the first half of this year, growth has now slowed to about 5.7%. Nevertheless, this rate is enough to catapult the market value beyond the $60 billion mark in 2000.