Furniture Industry Outlook: Growth in Sector Continues to Outspace U.S. Economy
Mike Hudgens, Southeast Regional Manager of CIT Commercial Services offers his insights on current trends and opportunities in the furniture industry.
Q: How would you describe the current state of the furniture sector?
A: The furniture sector continues to be very strong. The industry itself is performing roughly twice as well as the overall economy. According to Smith-Leonard Accounting Firm, the industry is growing at a rate of 6 to 7 percent year-over-year, which compares very favorably to the overall economy.
Q: Is the Made in America movement still relevant?
A: There are some varying definitions about what really is Made in America, and there's very little that's truly all American made now. It's very hard to buy fabric and leather that's made int he U.S. As far as wood furniture or case goods go, there are still a handful of U.S. manufacturers, but they're niche players. For many major manufacturers, their products are primarily imports. I think at one point many people tried to support the Made in America trend, but it seems they've kind of gotten over that. Furniture companies are now trying to sell, and appropriately so, the product, not sell where it's made.
Q: What's keeping execs up at night right now?
A: I believe many executives are concerned with things that are beyond their control. Consumer sentiment, which is driven by many factors, i.e. the stock market, politics, world affairs, etc...is a big concern. Furniture is the epitome of a discretionary spending industry. And while things feel a little better, we know that we've got these worldwide issues that are beyond anyone's control, whether it's China, Russia, the Middle East of Brazil. Quite a bit of furniture is made in Brazil, and it was one of the developing economies that was expected to perform well. Anything that causes the consumer discomfort has the potential to put the brakes on consumer spending. If you talk to the furniture folk\, many will agree they're riding a wave right now. But all these events that are beyond their control could put the brakes on a consumers' discretionary spending.
Q: Is manufacturing coming back to the U.S.?
A: On-shoring is not getting as much chatter and it doesn't seem to have as much steam as it once did. A year ago the conversation was a bit different. Because of the rising freight costs and the rising costs of labor in China and elsewhere, many companies were considering on-shoring or considering moving what was traditionally labor intensive manufacturing back to North America. However, think about what happened over the last 12 months - the price of fuel has come down. The cost to ship containers is down. And the devaluation in China has also brought labor costs down. Companies have to reconsider whether it makes sense to onshore now that their costs are really down from where they were a year ago.