Dunlap & Associates unveils the results of its October 2019 Quarterly MADA / OFI Trends Survey, a unique tool that measures the current business activity of the commercial (office, education, healthcare, & hospitality) furniture industry and its suppliers.
The October 2019 survey highlights are:
Gross Shipments Index:
58.33 = October 2019 Index
74.00 = July 2019 Index
57.79 = 59 Survey Average Index
The October 2019 Index fell to 58.33, nearly 16 points after the July 2019 Index jumped more than sixteen points to 74.00. The 3rd Quarter October index remains above the 59 Survey average, which is very important.
It is critical to recognize this reflects the rate of change over both the 1st and 2nd Quarters. First Quarter was unusually below the 57.79 survey average and the previous six months. We see this as a correction to the previous patterns.
The previous all-time high and low were in July 2019 (74.00) and April 2009 (22.42).
Order Backlog Index:
45.56 = October 2019 Index
71.50 = July 2019 Index
57.78 = 59 Survey Average Index
The October 2019 Index fell to 58.33, nearly 16 points lower than the July 2019 Order Backlog Index of 71.50 which jumped by more than sixteen points over the 1st Quarter.
It is critical to recognize this reflects the rate of change over both the 1st and 2nd Quarters.
January 2019 was previously the highest we have experienced since the survey began in 2004. It was well above the 59 survey average and was remarkably very strong. Like its sister Gross Shipments Index, the quarter-over-quarter change is significant, but can distort the really
The previous all-time high and low were in July 2019 (71.50) and July 2009 (25.00).
Employment Index:
52.78 = October 2019 Index
57.00 = July 2019 Index
52.89 = 58 Survey Average Index
The Employment Index measures the degree of increase or decrease in employment levels. The October 2019 Index 52.58 declined by 4.22 points but is almost equal to the 59 survey average.
Hours Worked Index:
56.67 = October 2019 Index
61.67 = July 2019 Index
56.06 = 59 Survey Average Index
The Hours Worked Index is closely tied to the Employment Index. When the Hours Worked Index exceeds the mid 50's (usually due to overtime), the following 1-2 quarters often see increases in the Employment Index.
The October 2019 Hours Worked Index is also nearly equal to the 59 Survey Average We view this is still reflective of the inability to fill both entry level and skilled positions which are still are driving up hiring and hours worked. Overtime remains the norm, not the exception.
Capital Expenditures Index:
54.38 = October 2019 Index
54.74 = July 2019 Index
55.89 = 59 Survey Average Index
Historically, the Capital Expenditures Index has steadily been in the mid to upper 50's. The October 2019 follows this pattern and is only 1.5 points below the 59 Survey Average. The all-time high was 64.74 in April 2017.
Tooling Expenditures Index:
52.00 = October 2019 Index
52.78 = July 2019 Index
56.36 = 59 Survey Average Index
The Tooling Expenditures Index tends to remain very steady from quarter to quarter and typically tracks along with Capital Expenditures, but the continued below average index during both the 2nd and 3rd Quarters is an unpleasant surprise.
New Product Development Index:
63.53 = October 2019 Index
61.05 = July 2019 Index
63.27 = 59 Survey Average Index
The October 2019 rebounded by 1.5 Index points, after the April 2019 Index declined by almost six points. October is very closed to the 59 survey average and returns to the low 60's. The highest we have experienced was the April 2015 Index of 69.70.
Raw Material Costs Index
42.50 = October 2019 Index
44.44 = July 2019 Index
44.87 = 59 Survey Average Index
Many commodity prices in the 3nd Quarter of 2019 continued to increase. Tariffs were felt during this quarter that were not reflected in the 4th Quarter of 2018 or 1st and 2nd Quarters of 2019.
The current index indicates that material costs have increased and are higher the 59 Survey average. We suspect that this will worsen in the 4th Quarter of 2019.
Employee Costs Index
47.55 = October 2019 Index
45.26 = July 2019 Index
46.55 = 59 Survey Average Index
Much like its companion Raw Materials Index, the Employee Cost Index is rarely above 50.0. Although higher healthcare costs are the most frequently identified issue that contributes to higher costs, Wage increases we saw in the 2nd Quarter appear to have stabilized. Healthcare costs remain an issue.
We expect Employee Cost increases will continue as long as we have a shortage of qualified labor and overtime is required to meet customer demand.
The Personal Outlook Index
57.37 = October 2019 Index
64.00 = July 2019 Index
59.15 = 58 Survey Average Index
Although it slipped from the previous quarter, it is still quite positive. This index had remained over “61” for the past 22 Quarters. This is remarkable and it still gives a boost to the Overall Index.
This index had remained over “61” for the past 22 Quarters. This is remarkable and it still gives a boost to the Overall Index.
Overall Index
53.14 = October 2019 Index
58.90 = July 2019 Index
55.07 = 59 Survey Average Index
The October 2019 Survey Index of 53.14 is just slightly below the 59 survey average.
Two out of ten index values improved from the previous quarter. With the exception of Order Backlog, the other Index changes are within normal or acceptable values.
The highest recorded Index of 59.72 in July 2005. The lowest was 41.45 in April 2009 during the bottom of the recession.
Dunlap commented: “We still feel good about where the industry is currently. The effects of the tariffs with China have dampened the 3rd Quarter and will likely impact the 4th Quarter and 1st Quarter of 2020. The overall economic growth seems to be slowing down and will probably affect this industry in 2020.
“In spite of the 3rd Quarter declines, we believe that the industry remains very strong.
“We are surveying many more than five or six companies. The “Big Twelve” are generally doing very well. However, it is the smaller “under $50.0 Million sales and fewer than 150 employees” companies that are driving this industry.
Outlook is 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 continue to be tariffs, travel, transportation and logistics costs. Healthcare costs are still the most commonly cited concern from respondents since this survey process was started in August 2004.