GRAND RAPIDS — The office furniture industry is on the way to having its worst yearly downturn ever recorded, as a result of the weakened U.S. economy that has cut deeply into business spending.
Industrywide shipments fell nearly 20 percent from a year ago during the second quarter and business isn’t expected to get much better for the remainder of the year, according to an industry trade association that expects to once again downgrade its sales forecast.
“I don’t remember it ever being this bad, certainly not this fast,” said Thomas Reardon, executive director of the Grand Rapids-based Business and Institutional Furniture Manufacturer’s Association, or BIFMA.
Barring any significant upturn during the second half of the year, 2000 will go down as the worst decline for the industry since sales volumes were tracked beginning in 1971, exceeding the 9 percent decrease experienced in 1991 during the last U.S. recession.
The second quarter saw industrywide shipments fall 19 percent from the same period a year ago. Orders for the quarter were off 16 percent, according to BIFMA.
While those comparisons are against a relatively strong year in 2000, the declines still represent “a pretty significant downturn,” Reardon said. “Everyone’s concerned.”
Year-to-date, industrywide shipments were down 9 percent as of June 30 and orders were off 14 percent. The mid-year figures were skewed somewhat by a “pretty healthy” backlog that ran over from 2000 to 2001 and affected first-quarter results, Reardon said.
The industry downturn, which began hitting as the U.S. economy slowed late last year, has forced manufacturers to curtail production, cut jobs and lay off workers since the first of the year. The latest cuts came two weeks ago when Zeeland-based Herman Miller Inc. eliminated 48 positions in response to slower sales.
Those layoffs, as well as cuts at the other “Big 3” office furniture makers, Grand Rapids-based Steelcase Inc. and Holland-based Haworth Inc., have caused some ripple effects through the local economy, said Mitch Stapley of Fifth Third Financial Advisors.
The region, though, is “holding in there” relatively well, Stapley said. Many local corporations tend to be fairly lean and have the ability to react quickly to upturns and downturns in business conditions, he said.
The companies that are feeling the largest effect are those that have contracts to supply both the office furniture and automotive industry, the latter of which also is experiencing slower sales than a year ago, although it remains relatively healthy.
For the foreseeable future, Stapley sees the economy not picking up steam until the end of the year.
“We’ll probably muddle along here through 2001,” Stapley said.
Stapley, like many economists, expects the U.S. economy to begin to rebound late this year and early next year, although data continues to show mixed signals for now. The general consensus, however, is that the economy is bottoming out right now and will begin to strengthen in the months ahead, perhaps quickly once the rebound kicks in.
“We’ve pulled out of the nosedive and are leveling,” Stapley said. “I think we’ll be looking better by the end of the fourth quarter.”
BIFMA’s Reardon is hoping for the same. The association has already revised its forecast for 2001 and 2002 twice since it was first issued, and in May said that it expected shipments to fall 4.4 percent for 2001, to $12.7 billion, from last year. New orders were forecast in May to decline 6.8 percent from 2000.
BIFMA will issue a revised forecast shortly based on the second-quarter results, Reardon said.
The general feeling within the industry is that business is bottoming out and that it will pick up toward the end of the year and into 2001, as corporations free up capital spending as they see the economic rebound occurring.
“In talking to people, it doesn’t seem to be getting any worse right now,” he said. “We hope when the industry does turn around, it will result in a relative quick turnaround for us, too.”