From Home Furnishing Business
Cover Story: STATE OF THE INDUSTRY
What a rollercoaster ride! If not the nation, the furniture industry has had a “V recovery.” The major concern is that it does not become an elongated “W.” Graphic 1 presents the historical quarterly performance along with the forecasted quarter to quarter comparison for the balance of the year and the 2021 forecast.
As can be seen from Graphic 1, with all the turmoil, the result was a dismal 1.8% down in the second quarter. However, with the conversion of the substantial backlog at the end of June, for some more than 30%, the industry soared in the third quarter to what we believe will be a growth of 10.1%. Unfortunately, this irrational exuberance will not continue and the industry will decline, we believe, to a 2.0% growth for the fourth quarter for the end of the year. After all the angst, a meager 3.7% growth year over year for 2021 and a slight rebound to 4.0% in 2020. What caused this irrational exuberance? Simply put, the consumers were encouraged to stay at home and not spend. And the nation sent significant stimulus in the form of checks and enhanced unemployment.
This created a major increase in DISPOSABLE INCOME never before experienced. Graphic 2 illustrates. But the party may be over. At this point, no more stimulus is forthcoming from the federal government. The job losses thought to be temporary now appear to be permanent with small business support (PPP Loans) seemingly exhausted. As with other downturns, now the best predictors will be CONSUMER CONFIDENCE and UNEMPLOYMENT.
Consumer confidence fell 40% from its near-term peak in 2018 with the corresponding decrease in furniture consumer spending. At this point, consumer confidence has not reached the level of the Great Recession; however, the consumer has not fully absorbed the impact of the job loss. Graphic 3 presents the trends.
What is real is the unemployment. In one short period of time, 30 million jobs were gone. While many believed it would be short term, it has seen a third of the loss return to work. However, each month another million jobs lost is added to the rolls. Graphic 4 illustrates. This time, furniture spending held back— there are many theories as to why, such as people being forced to “shelter in place” or work at home becoming a permanent condition. The future trends are not clear. The following sections present the analytics behind our forecasts. This forecast will be modified and adjusted as we move through the year. This is followed by the insight of three of the recognized experts in the industry.
With all of our perspective, we may find our way through the fog of the new normal.