July 2016 Furniture Industry Index Is Solid - Over Three Years of Steady Growth

Results from the latest quarterly MADA / OFI Trends Survey produced by Michael A. Dunlap & Associates, LLC suggests that “the industry continues to grow steadily, and that the smaller to mid-sized companies are growing faster than the Top Five.

 This survey was completed during the month of July 2016 and marks the 48th Edition.

The July Overall Survey Index is (56.03) compared to an almost identical October 2015 Overall Index of (56.05). The 48 Survey average for the overall index is 54.82. The highest recorded Index was 59.72 in July 2005 and the lowest was 41.45 in April 2009 during the bottom of the recession.

“The industry continues to grow steadily. The smaller to mid-sized companies are growing faster than the Top Five. The Overall Index is strong and is definitely above the 54.82 Survey average. 2015 was the best year we had seen in well over a decade and we remain confident that 2016 will be even better!” Mike Dunlap commented.

The July 2016 survey highlights are:

Gross Shipments Index rose from April to 58.95 after an all-time record of 64.33 in Jan 2016 and 59.33 in October 2015. The 48 Survey Average is 57.94. The strong Order Backlog Index of 63.33 increased from 58.06 in April. The 48 Survey Average is 57.03.

The Employment Index also retreated to 53.42 from 54.24 in April and a strong 57.00 in January. The 48 Survey Average is 52.40. The Hours Worked Index of 57.78 dipped slightly from 58.28 in April and compares to 57.50 in January. The 48 Survey Average is 55.65.

The Capital Expenditures slipped slightly to 56.49 from a nice bump to 61.25 in April 2016. Tooling Expenditures dipped to 55.68 from 57.19 in July. These compare to the 48 Survey Averages of 55.62 and 55.97. 

Three out of ten Index values have improved and seven have declined, but these are simple corrections in the industry’s performance.

New Product Development fell to 61.32 from 63.03 in April 2016. The 48 Survey Average is 63.47. This has been one of our strongest indexes, but it has been declining.

The July 2016 Raw Material Costs 46.49 is a significant decline and is probably a correction to the very high index values of the past five quarters. The April 2016 Index was 53.33. Five of the past five quarters are all above 50.00 and the 48 Survey Average is 45.06.

Employee Costs also worsened to 44.74 from April’s 47.81 and January’s 46.55. The 48 Survey Average is 46.67.

 The Personal Outlook Index is 62.37, up from 61.82 in April and 61.03 in January, but down from October’s 64.67, The all-time high was 66.40 in July 2016. The 48 Survey average is 58.08.

Dunlap further stated “The high Gross Sales, Order Backlog, and Personal Outlook are indicators of the current strength of the industry. “The shifts in Employment Levels and Hours Worked index values are indicative signs that hiring new employees might be keeping up with demand and is still not being offset by less overtime.

“The decreases in Capital Expenditures and Tooling Expenditures are quite small when comparing them to their 48 survey averages, “The New Product Development index is still of significant concern and we will monitor this puzzling trend very closely.

Both manufacturers and suppliers continue to report similar experiences. “The sharp drop in the Raw Material Cost Index appears to be a market correction in the prices of commodities like fuel, steel, copper, and plastics. It’s actually was “deflation” scenario that is typically good only for a short period. Yes, it beats index values in the upper 30’s and lower 40’s.

“The Employee Cost index value is not unusual and is slightly better than the 48 survey average.” Dunlap added, “Although there are signs of softening, I am delighted to see the strength of the Personal Outlook Index.” It’s a purely emotional question but we put a lot of value on this content.”

The most frequently cited perceived threats to the industry’s success are the economy, some materials costs, healthcare costs and exchange rates. Healthcare costs are the most commonly cited concern from respondents since this survey process was started in August 2004.

“Three out of ten Index values have improved and seven have declined, but these are simple corrections in the industry’s performance. Only Materials and Employee costs are below the ‘50’ level. We maintain the opinion that the industry will continue to grow steadily during mid- 2016 and probably into 2017.” 

The July 2016 MADA / OFI Trends survey was sent to more than 700 individuals involved with office furniture manufacturing and suppliers from Africa, Asia, Australia, Europe, North and South America and from companies ranging from more than $1 Billion in sales to less than $10 Million in sales. The survey repeats in October 2016.

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