2020 Consumer Snapshot

April 16, 2015  by in Economic News, Industry   

As the leading edge of the Millennials, the second largest birth generation in U.S. history, starts to make its way into the prime furniture purchasing age groups and the Baby Bust generation ages, the furniture industry will be looking forward to new household formations, first time home purchasers, and new families.

These children of the Baby Boomers— Generation Y and Millennials—are entering their 30s and will slowly feed the furniture industry for the next 20 years. Not surprisingly, Baby Boomers turning 65 in the next 10 years will facilitate a dramatic increase in the 65 and over age group.

Combined consumer age groups 25-to-34 and 35-to-44 are projected by the U.S. Census Bureau to increase by 8.7 million people or 10 percent over the next decade.

Table A below shows the percent growth by age segment.

 

As shown in the table, Baby Boomers aging over the next decade will cause the 65 and over age segment to skyrocket 37.8 percent—increasing at a rate of 3.3 percent a year from 2015 to 2025.

Combined, the 25-to-44 year olds are projected to increase 10.4 percent over the next decade. Note that consumers aged 35-to-44 spend the most on home furnishings per household of any group.

Meanwhile, the tail end of the Baby Boomers has finally entered its 50s. The 45-to-54 year olds, who have been the highest populated group over the last 10 years, will now house much of Generation X, also referred to as the Baby Bust generation, and are estimated to drop an average of 1 percent a year in population—with a 5.7 percent decline by 2025. These high earning consumers have historically been key purchasers of upper and premium furniture.

While projections for Ages 55-to-64 show a growth of 5.2 percent by 2020, these final Baby Boom numbers are expected to drop 3 percent by 2025.

The youngest segment, ages 15-to-24, is due to remain flat over the next five years and decline 1.2 percent by 2020.

 

The Next 10 Years

Table B, below, depicts the projected population in five-year increments—growth by 2020 and 2025. Ages 25-to-44 and 65 and over, will have steady increases each five-year period, while the remaining age segments are projected to experience both upturns and downturns during the same time span.

 

Each of these age segments is discussed in more detail.

 

Ages 15 to 24

Many of the Millennials will be aging out of the youngest of the future furniture purchasers, the 15-to-24 year old group, over the next five years. The group is expected to decline 1.7 percent by 2020 and remain relatively flat with 0.4 percent growth from 2020 to 2025.

 

Ages 25 to 35

As the Millennials begin to age into the young adult group ages 25-to-34, a projected rise of 6.3 percent in population by 2020 should cause the furniture industry to take notice. A poor job market has previously forced many back home to parents and delayed marriage for others. But a more robust economy should help with new household formations resulting in increased industry sales for this age group.

 

 

Ages 35 to 44

The largest spenders on home furnishings, the 35-to-44 year olds, are expected to have the highest growth among the key home furnishings purchasers—increasing 5.2 percent by 2020 with an additional jump of 7.7 percent by 2025. Combined 25-to-44 year olds are set to increase in number from 84.7 million to 93.4 million over the next decade—a gain of 10.4 percent. These younger adults will become the heart of the furniture industry.

 

Ages 45 to 54

Prime earners ages 45-to-54 are projected to decrease 5.3 percent in the next five years and will ultimately drop from 43.1 million in 2015 to 40.7 million in 2025. The decline of these peak income consumers will have the most negative impact on the furniture industry as they are often key purchasers of premium furniture.

 

Ages 55 to 64

While expected to jump 5.3 percent by 2020, Baby Boomers will age out of this group over the next five years—resulting in a slight overall 10-year growth of 1.6 percent.

 

Ages 65 and Over

Leading-edge Baby Boomers are aging into the 65 and over segment, which is expected to skyrocket 18 percent by 2020 and have a total increase of 37.8 percent for the entire decade. The furniture industry may think it will be sad to see the largest generation in history move into retirement; however, their influence will still be significant over the next 10 years.

 

Trend Impact on Sales

All of this demographic data is great information for reading how the shifting population will impact sales in the furniture industry.

The growth of the 25-to-44 year olds coupled with the decline of ages 45-to-54 should still result in moderate growth as the Millennials start to spend. This is based solely on demographic trends—projected population growth from the U.S. Department of Commerce and the U.S. Census Bureau, current headship rates, and most recent average consumer expenditures by age group from the Consumer Expenditure Survey.

Table I below shows the estimated industry sales by each age group.

 

 

 

Demographic trends alone should grow the industry by $7.7 billion dollars over the next 10 years to $97 billion. Because of their sheer numbers, in 10 years the over-65 Baby Boomers will still spend $17.8 billion and have the highest volume increase $3.1 billion. The 35-to-44 year olds, although smaller in number, will spend $21.7 billion with the highest average per household and grow by more than $2.5 billion in industry sales.

 

 

Table J, above, shows the expected percent increases in industry sales as a result of demographically driven trends.

Couple these demographically driven increases with the U.S. Department of Labor’s projected increases in consumer spending over the next 10 years and the outlook significantly improves. In addition, increased housing demand by the Millennials will also fuel the furniture industry.