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Furniture industry sales rise

Monday, July 4, 2011

 The furniture industry experienced a modest turnaround last year, but not strong enough to offset what some describe as the biggest sales downturn in recent memory.

A report released last week by Smith Leonard, a High Point accounting and consulting firm, showed that sales in 2010 jumped nearly 6 percent following declines — some of them double digits — in the four previous years.

From 2006 to 2009, the survey said, sales dropped by 32 percent.

“I don’t think we have seen this sort of downturn, (one that’s) this long or this deep,” said Ken Smith, managing partner of the firm and author of the annual report.

“The recession for the industry was longer than I think anyone expected it to be.”

But one year of growth does not make a recovery.

The survey of an undisclosed number of residential furniture manufacturers and distributors showed that the industry recorded sales of $19.9 billion last year compared with $18.6 billion in 2009.

Yet, that’s far below the $27.2 billion in sales in 2005, the last year before the downturn.

“While we did see improvement, 2010 was another year of ups and downs,” the report said. “For the first six to eight months, business seemed to pick up. While certainly not to ... prior levels, at least most of the industry was finally moving in the right direction.”

But about the end of last summer, business became unstable, the report said. This trend continued into 2011.

Richard Bennington, professor of home furnishings at High Point University, describes what’s happening as “the seeds of a recovery.”

As the recovery unfolds, he says, the furniture industry will look much different than it once did.

“It’s going to be a long time before you see these mega (manufacturing) plants,” Bennington said. “The growth is going to be in the small niche company that defines its niche well.”

Area economic development officials say that’s already happening.

In recent months, they’ve announced a number of furniture company relocations and expansions. Most have been small operations, employing fewer than 100 people. But one has been sizeable.

United Furniture Industries said last year that it would expand its North Carolina presence by opening a plant in Davidson County to manufacture living room and den seating. The move would create 150 jobs.

Then, in March, the company announced it would expand again, adding another 200 jobs.

In a news release, Steve Googe, executive director of the Davidson County Economic Development Commission, said the expansion signals “the Triad region’s furniture sector is on the comeback.”

Another optimistic sign can be found in the growth of exports.

The North Carolina Department of Commerce says furniture shipments abroad jumped 19.4 percent in 2009-10 after declining nearly 40 percent in 2008-09. Exports are up in 2010-11 by 13.3 percent.

Increasingly, industry leaders say, consumers want products that are made in America. They’re looking for better quality and greater selection.

They say companies have found that because of high freight costs it’s cheaper to make furniture in the U.S. than overseas. They add that the emphasis on furniture manufacturing in China, which enticed some companies to shift their production offshore in recent years, has declined.

“The U.S. furniture industry finds itself in a strengthening position,” said Charlie Greene, chairman of the North Carolina Furnishings Export Council. “The Chinese furniture industry is not as robust as it used to be. ... Now, there are lots of companies looking here.”

Yet, the sluggish economic recovery still makes furniture a tough sell.

“The furniture industry is making a recovery but it is not as noticeable yet because we still have got to get the rank-and-file American worker back to work,” Greene said. “They buy furniture.”

Contact Donald W. Patterson at 373-7027 or don.patterson@news-record.com
 

Accompanying Photos

H. Scott Hoffmann (News & Record)

Photo Caption: Shirley Griffiths, Laurie Ross and Regina Dinning of Banner Marketing in Spokane, Washington talk about their marketing plans for Lane Furniture in a Lane Showroom during the furniture market this past spring in High Point.

Comments

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Andrew Brod

July 4, 2011 - 10:48 am EDT

I realize that Don Patterson was just quoting industry officials who said that American consumers are increasingly demanding American-made furniture, but that can't be true, and anyone whose job isn't to push American-made furniture would agree.

Consumers always SAY they want to buy American-made products, but they NEVER actually do so. Consumers want value, period. Fortunately or unfortunately, they leave their politics in the parking lot. Once they hit the store and see what's there, they look for value, and if that means foreign-made furniture, so be it.

It defies belief that in 2010, when the economy was very weak and consumers were watching every penny, all of a sudden American consumers started preferring American-made products over better value. It didn't happen.

Now, this isn't to say that great values can't be found among American-made products. Quite the contrary. But when Americans buy American-made merchandise, it's because they've found good values, NOT because they wanted to buy American.

Andrew Brod

July 4, 2011 - 10:57 am EDT

Further context: It's good that domestic sources saw rising sales in 2010. It was the first time since 2006, and that's great. Moreover, their sales rose by about 6% in 2010, as compared to a little less than 2% for all furniture sales. In other words, purchases of American-made furniture rose faster than purchases of foreign merchandise.

(However, I note that the Smith Leonard survey includes both American furniture manufacturers AND distributors, so I can't say for sure that no foreign-made furniture was included in their figures.)

But before we get too happy, we need to understand how supply chains are used. When orders tick up a little, it might not make sense to source from Asia, because to make that work you often need big orders and big shipments. For smaller orders, it makes more sense to source domestically and perhaps even locally. The upturn in 2010 was nice, but what will really be telling is what happens when orders finally increase more significantly. When big shipments are needed and longer lead times are tolerable, my guess is that more of the orders will head to Asia, as they've been doing for some time now.

The recession altered the equation, but not permanently.

Andrew Brod

July 4, 2011 - 11:01 am EDT

What could alter the equation permanently are a series of trends (such as rising fuel prices) that have nothing to do with the Great Recession:

https://web.uncg.edu/bae/documents/cber/article0uCTOGTzOp.pdf

rmacz

July 4, 2011 - 12:01 pm EDT

Most of these sales show a significant rise, but we know that inflation is factored in the increase of rising cost. When these reports come out, just why can't they show us that percentage.

Andrew Brod

July 4, 2011 - 12:25 pm EDT

Most major economic indicators correct for inflation, so this usually isn't an issue. But not so for retail-sales data. The 2% figure I noted is nominal, not real (i.e. inflation-adjusted). However, that isn't a big problem for this story given that inflation in 2010 was virtually nil.

I don't know if the data collected by Smith Leonard are real or nominal. I think they're nominal, which if true would mean that even though they don't correct for inflation, they're directly comparable to the overall retail data to which I alluded.

rmacz

July 5, 2011 - 7:03 pm EDT

I'm still bamboozled by these numbers, as well as some other folks. We know that the stimulus money cost $278,000.00 per job, any chance a lot pork money went to buying furniture? hmmm
http://www.weeklystandard.com/blogs/obama-s-economists-stimulus-has-cost...

eurobiz

July 4, 2011 - 2:34 pm EDT

The underplaying of the export quotient in this article is self defeating. The American furniture manufacturers are not grasping the global market as the future of their businesses. Focus on the BRIC countries is only temporary. The entire world should be our focus as furniture manufacturers....we need to focus on exports, exports, exports. The US economy not only is still spluttering but the average American can easily live with the home furniture/fashion they have already....The desire to upgrade the furniture in a home that continues to decrease in value is counter intuitive. The ultimate recovery will be very slow in the US on average. Our manufacturers who do not engage in export themselves should rely on the areas of the country that do, such as Miami and New York.

Dman94

July 4, 2011 - 10:08 pm EDT

What a laughing stock of a story! Anyone that believes this load of dairy fertilizer can contact me about a bridge that I have for sale in NYC!

As a previous person noted, the American person/household is willing to stick with their current home furnishings/style because there is no excess disposable income to do a home makeover!

Andrew Brod notes that inflation is considered in the numbers given in the article, however, how does the average person reading this know this to be true? NO WHERE is that stated/inferred/implied! I think Mr. Brod is drinking some strong tea!

And then to read the garbage stated by S. Googe from Davidson County is even worse! That county has one of the highest unemployment rates in the Triad region of NC. Sadly, far too many of the residents of that area are willing to take the long shot chance and seek employment with a furniture company as compared to an unemployment check. United Furniture is not going to offer any type of living, much less surviving, wage to those supposed 200 or so employees. They know that the unemployment rate is high and that the people will take the lowest wage that can be offered.

I find this article to be totally insulting to the intelligence of everyone. Shame on the News & Record for reporting this. This reaks of the type of supposed reporting offered by WFMY/Channel 2 in Greensboro!

Andrew Brod

July 5, 2011 - 7:51 pm EDT

I didn't say that "inflation is considered in the numbers given in the article," mostly because I don't know what that means. What I said was that I don't know whether the Smith Leonard numbers are corrected for inflation. I also said it doesn't matter much for these numbers given that there was essentially no inflation in 2010 (the year to which the data apply).

It's true that news stories about retail-sales data rarely if ever note that the data aren't corrected for inflation, and that's unfortunate. There are many things the news media leave out when they report on economic indicators.

As for how I know what I know, it's not strong tea but simple experience. I know where the data come from and I've read the technical notes.

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