Michael A. Dunlap & Associates, LLC unveils the results of its April 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. This survey was completed during the month of April 2019 and marks the 57th Edition. The Survey first began in the summer of 2004.
The survey focuses on ten key business activities and respondents rate each area on a scale of TEN (the highest) to ONE (the lowest). These include Gross Shipments, Order Backlog / Incoming Orders, Employment Levels, Manufacturing Hours (Overtime vs. Reduced Hours), Capital Investment, Tooling Expenditures, New Product Development Activity, Raw Material Costs, Employee Costs, and the respondents’ Personal Outlook on the industry.
The unique element of this survey is the establishment of an Industry Index Number to quantify where the industry is currently performing. For example, an index of 100 means that 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”.
The April 2019 survey highlights are:
Gross Shipments Index:
57.73 = April 2019 Index
64.40 = January 2019 Index
58.23 = 57 Survey Average Index
The April 2019 index declined more than six points to 57.73 which is slightly below the 58.23 survey average. The previous all-time high and low were in July 2018 (66.86) and July 2009 (41.40).
Order Backlog Index:
55.00 = April 2019 Index
67.92 = January 2019 Index
57.76 = 57 Survey Average Index
The April 2019 Order Backlog Index of 55.00 fell by almost twelve points over the 4th quarter. January was the highest we have seen since the survey began in 2004. It was well above the 57 survey average and was remarkably very strong. Like its sister Gross Sales Index, the quarter-over-quarter decline is significant.
Although both are below the 57 survey averages, both are well entrenched into the mid- fifties and remain on solid ground.
We will watch these two index values very closely during the 2nd and 3rd quarter of 2019. the 2nd Quarter of 2019 and into the 2nd Quarter.
Employment Index:
55.00 = April 2019 Index
55.20 = January 2019 Index
52.61 = 57 Survey Average Index
The Employment Index measures the degree of increase or decrease in employment levels. The April 2019 Index 55.00 was nearly stable and declined by a mere 0.20 points and is well above than the 57 survey average.
Hours Worked Index:
56.11 = April 2019 Index
59.58 = January 2018 Index
55.96 = 57 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 Hours Worked Index slipped by 3.5 points from January 2019 and remains above the 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, although at reduced rates.
Capital Expenditures Index:
54.29 = April 2019 Index
61.20 = January 2019 Index
55.93 = 57 Survey Average Index
Historically, the Capital Expenditures Index has steadily been in the mid to upper 50’s. The April 2019 slipped by almost nine points over the January Index. It is slightly lower than average. The all-time high was 64.74 in April 2017.
Tooling Expenditures Index
52.50 = April 2019 Index
57.50 = January 2019 Index
56.49 = 57 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 significant decrease during the 1st Quarter is an unpleasant surprise.
As a benchmark, the April 2017 Index of 66.65 was the previous all-time high.
New Product Development Index:
59.55 = April 2019 Index
64.40 = January 2019 Index
63.30 = 57 Survey Average Index
The April 2019 Index declined by almost six points and is below the 57 survey average, but remains in the high 50’s. The highest we have experienced was the April 2015 Index of 69.70,
Raw Material Costs Index
45.91 = April 2019 Index
47.40 = January 2019 Index
44.88 = 57 Survey Average Index
Many commodity prices in the 1st Quarter of 2019 increased. Some tariffs were felt during this quarter that were not reflected in the 4th Quarter of 2018. The current index indicates that material costs have steadied and are above the 57 Survey average.We suspect that this will worsen in the 2nd and 3rd quarters of 2019.
Employee Costs Index
43.33 = April 2019 Index
48.33 = January 2019 Index
46.55 = 57 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 this quarter (again) appear to have exceeded healthcare costs. We expect this continue as long as we have a shortage of qualified labor.
The Personal Outlook Index
65.91 = April 2019 Index
66.54 = January 2019 Index
59.10 = 57 Survey Average Index
Although it slipped slightly from the previous quarter, this index has remained over “61” for the past 21 Quarters. This is remarkable and most certainly gives a boost to the Overall Index.
Overall Index
54.58 = April 2019 Index
59.31 = January 2019 Index
55.04 = 57 Survey Average Index
The April 2019 Survey Index of 55.58 is just slightly below the 57 survey average. All ten index values decline from the previous quarter, but each remains 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 “In spite of the across-the-board declines in all ten index values, we believe that the industry remains very strong. It’s a correction, combined with routine 1st quarter issues.
“We have had several quarters of increasing growth and we are probably past time for a modest correction. The 1st quarter was hit with tariffs, inclement weather, and labor shortages that affected several elements.
“We feel good about where the industry is currently. 2018 finished strong in spite of the political uncertainties, the effect of the mid-term elections, tariff and trade questions. The effects of the next round of tariffs are still too early to predict, but it is reasonable to believe that it will dampen 2nd and 3rd quarter numbers. The overall economic growth will likely affect this industry.
Dunlap further stated, “We are surveying many more than five or six companies. The “Big Nine” are experiencing excellent growth, but the smaller under $50.0 Million sales and fewer than 250 employees 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 have been the most commonly cited concern from respondents since this survey process was started in August 2004.
As always, Dunlap thanked the respondents with this comment. “Over 70% of the responses come from “C” level executives who are the Chairman, CEO, COO or President of their organizations. I am always extremely grateful for their participation and support. Their suggestions and recommendations continue to be helpful to the performance and content of this unique survey.”
The April 2019 MADA / OFI Trends survey was sent to more than 550 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. The survey repeats in July 2019. For further information, please contact:
Mike Dunlap at
Phone: 616-786-3524
Mobile: 616-990-8725
e-mail: mike@mdunlap-associates.com
Michael A. Dunlap & Associates, LLC, is a consulting firm that focuses upon issues involving the working, learning, healing, and hospitality environments and furniture industries.