Analyst reports office furniture flat in first quarter


Michael A. Dunlap & Associates’ quarterly survey of the office furniture industry completed in April indicates overall activity was down slightly from the prior quarter — a new overall score of 52.84 for the period, compared to 54.30 in January.

“The industry can be described in one simple word — flat!” said Dunlap. “Given current economic conditions, I think this is not bad news. The overall index continues to remain above 50 and is definitely in line with previous first quarter survey index values. I think that the industry is still on solid ground, in spite of some lower indicators.”

The current average overall index, since the survey began in 2004, is 54.28. The highest recorded overall index was 59.72 in July 2005; the lowest was 41.45 in April 2009.

The Dunlap survey is designed to reflect the current business activity of the office furniture industry and its suppliers in 10 key business activities, with respondents rating each area on a scale of one to 10. The higher the score, the better that segment of the industry is doing. An index score of 50 means there has been no change up or down in that quarter.

The survey goes to more than 750 individuals involved with office furniture manufacturing and suppliers from around the world. More than half of the responses come from top executives.

The April survey scores are:

  • Gross Shipments dropped to 49.45, significantly lower than the running average of 57.57 for all surveys since 2004, and Order Backlog recorded 51.27, also significantly lower than the running average of 56.45.
  • The Employment Index rose to 51.82, nearly even with running average of 51.69. The Hours Worked Index declined to 52.88, below the running average of 55.53.
  • Capital Expenditures fell to 54.72 and Tooling Expenditures rose to 57.36, compared to their respective running averages of 55.33 and 55.60.
  • New Product Development rose to 65.74, well above the running average of 63.41.
  • Raw Material Costs remain nearly unchanged at 46.15, but are much better than the running average of 43.81. Employee Costs dipped to 43.85, compared to the running average of 46.88.
  • The Personal Outlook of the individuals completing the survey slipped from 59.20 to 54.73, below the running average of 56.31.

“The declines in both Gross Sales and Order Backlog index values are somewhat surprising, as both had improved during the third quarter of 2012,” said Dunlap. “I think that Super Storm Sandy and significant declines in government sales had significant influence during this quarter. Employment Levels and Hours Worked index values also fell for the same reason. Both manufacturers and suppliers appear to be affected equally.”

He added that, in his opinion, the “modest decline in Capital Expenditures, improvements in Tooling Expenditures and New Product Development are mixed when compared to their 36-survey averages, which is disconcerting. The rise in New Product Development is typical during the first quarter.”

The Raw Material Cost and Employee Cost index values “are always a concern and rarely show much improvement, let alone rise above 50,” said Dunlap.

“I am disappointed to see the decline of the index in Personal Outlook,” he added.

According to Dunlap, the most frequently cited perceived obstacles to the industry’s success are health care costs, transport costs, energy costs, exchange rates, and the costs of materials (steel and wood), with materials and health care the most commonly cited concerns from respondents since this survey began.

He said he expects to see the industry experience slow growth during the next two quarters, then a “modest acceleration” in late 2013 and into 2014.

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