The commercial furniture industry “remains very strong,” according to Michael Dunlap after analyzing the results of the Michael A. Dunlap & Associates January 2019 Quarterly MADA/OFI Trends survey.
The owner and CEO of the consulting firm that focuses on the furniture industry and does the quarterly survey noted the overall index has improved to near record levels and is well above the 55.05 survey average.
“I feel good about where the industry is currently. 2018 finished strong in spite of the current political uncertainties, the effect of the midterm elections, tariff and trade questions. The effects of the current U.S. government shutdown are still too early to predict general economic growth and how they may affect this industry.
The survey, which was completed in October, measures the current business activity of the commercial (office, education, health care and hospitality) furniture industry and its suppliers.
“The Big Nine are experiencing excellent growth, the smaller under $50 million sales and fewer than 250 employees, are driving this industry,” Dunlap said. “I am delighted to see the strength of the order backlog and personal outlook index values. Outlook is a purely emotional question, but we put a lot of value on this content.”
The survey showed the most frequently cited perceived threats to the industry’s success are tariffs, travel, transportation and logistics costs. Health care costs have been the most commonly cited concern from respondents since the survey started in August 2004.
Ten key business activities are surveyed and respondents rate each area on a scale of 10 (the highest) to one (the lowest).
The survey is the establishment of an industry index number to quantify where the industry is currently performing. An index of 100 means things “couldn’t be better,” an index of one is “absolutely the worst” it can be, and an index of 50 means it is neutral; no change up or down.
Here are the highlights:
Gross shipments index
January 2019 index: 64.40
56 survey average index: 58.24
The index jump of more than four points to 64.40 is well above above the 58.24 survey average. The previous all-time high and low were in July 2018 (66.86) and July 2009 (41.40).
Order backlog index
January 2019 index: 67.92
56 survey average index: 57.81
The index of 67.92 improved by seven points and is the highest seen since the survey began in 2004. It is well above the 56 survey average and is remarkably very strong. The July 2018 order backlog index of 66.57 was the all-time high.
MADA sees this as a positive indicator for industry sales for the first quarter of 2019 and into the second quarter.
Employment index
January 2019 index: 55.20
56 survey average index: 52.57
The employment index measures the degree of increase or decrease in employment levels. The index 55.20 improved by three points and is well above the 56 survey average.
In West Michigan and many other industry locations, labor shortages are driving up wages but increased hiring remains strong.
Hours worked index
January 2018 index: 59.58
56 survey average index: 55.96
The hours worked index is closely tied to the employment index. When the hours worked index exceeds the mid 50s (usually due to overtime), the following one to two quarters often see increases in the employment index. The hours worked index slipped by less than one point from October 2018.
MADA said 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 is now the norm, not the exception.
Capital expenditures index
January 2019 index: 61.20
56 survey average index: 55.96
Historically, the capital expenditures index has steadily been in the mid to upper 50s. The January 2019 accelerated by almost nine points to 61.20 over the October index. It is significantly higher than average. The all-time high was 64.74 in April 2017.
Tooling expenditures index
January 2019 index: 57.50
56 survey average index: 56.56
The tooling expenditures index tends to remain very steady from quarter to quarter and typically tracks along with capital expenditures, but the significant increase during the fourth quarter is a nice surprise, according to MADA. The April 2017 index of 66.65 was the previous all-time high.
New product development index:
2019 index: 64.40
56 survey average index: 63.37
The January 2019 index improved by four points and is back above the 56 survey average, which is good news. The highest experienced was the April 2015 index of 69.70.
Raw material costs index
January 2019 index: 47.40
56 survey average index: 44.86
Many commodity prices in the fourth quarter of 2018 remained steady. Tariffs have not subsided nor increased. Through 2015 and into 2016, the average was 50.95. The current index indicates material costs have steadied.
Employee costs index
January 2019 index: 48.33
56 survey average index: 46.61
Much like its companion raw materials index, the employee cost index is rarely above 50. Although higher health care costs are the most frequently identified issue that contributes to higher costs, wage increases this quarter appear to have exceeded health care. This is expected to continue as long as there is a shortage of qualified labor.
The personal outlook index
January 2019 index: 66.54
56 survey average index: 58.98
This is the strongest personal outlook index seen since the survey began. It has remained over 61 for the past 20 quarters. According to MADA, this is remarkable and most certainly gives a boost to the overall index.
Overall index
January 2019 index: 59.31
56 survey average index: 55.05
The January 2019 survey index of 59.31 is boosted by strong improvements in nine out of 10 individual index values and brings it closer to the highest recorded index of 59.72 in July 2005. The lowest was 41.45 in April 2009 during the bottom of the recession.
The trends survey was sent to more than 600 individuals involved with the commercial furniture industry’s 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 $500,000 in sales. More than 75 percent of the responses come from C level executives who are the chairman, CEO, COO or president of their organizations.
This was the 55th edition of the survey, which repeats in April.