Monthly Issue
From Home Furnishing Business
July 11,
2019 by HFBusiness Staff in Business Strategy, Industry 
It has sometimes been said that America gets the generation it needs when it needs it the most. During the next five years, over 20 million consumers tagged as Generation Z will pour into young-adult status with the leading edge surpassing the age of 21 this year, graduating from college and entering the workforce. Studies suggest they are self-confident and more traditional and pragmatic than older Millennials, and will demand total integration in their shopping experiences. They are tired of hearing about all of society’s problems. They get it and believe they are the generation to fix it.
The total wave of approximately 66 million Gen Zers will continue for 16 years. Much has already been studied and surveyed about these consumers who have never known a world without the internet or smartphones. Here’s what we know so far.
How big is Generation Z?
Researchers have been non-committal in defining the actual end of the Millennials and the beginning of Generation Z (also being called the iGeneration or iGen), but recently the generational research giant Pew Research Center has defined this cohort as being born between 1997 and 2012, a period of 16 years, matching the year span of Millennials and Gen Xers. Based on current estimates from the U.S. Census Bureau, Generation Z is currently about eight percent smaller than Millennials and roughly two percent larger than the older Gen Xers, who are predominantly their parents (Figure 1). The impact of future immigration will swell their ranks further.
Ethnically Diverse
As shown in Table A, Generation Z is the most ethnically diverse of all the generations preceding it. Forty-eight percent of 6 to 21-year-olds in 2018 (Generation Z) are non-white, significantly more compared to 39 percent of Millennials in 2002, 30 percent of Gen Xers in 1986 and 18 percent of Early Boomers in 1968. As immigration continues to impact Gen Z, they are projected to become even more ethnically diverse falling below 50 percent white in the future. Because of this diverseness, early indications show they are they less judgmental and more accepting of cultural differences.
College Enrollment and Early Employment
On their way to being the most college educated, Generation Z has the highest percent of 18 to 20-year-olds enrolled in college among those no longer in high school – at 59 percent in 2017 (Table B). Millennials in 2002 were the first generation to reach over half (53 percent) of young adults in college – up from 44 percent of Gen Xers in 1986.
Generation Z will enter the workforce with the least job experience of any cohort (Table C). Only 19 percent of Gen Z teens 15 to 17-year-olds in 2018 were employed full or part time during the previous year compared to 30 percent of Millennials the same ages in 2002 and 41 percent in Gen Xers in 1986. Numbers are also lower for Generation Z 18 to 21-year-olds with only 58 percent holding a job in 2018, compared to 72 percent and 78 percent of Millennials and Gen Xers, respectively.
Although many Gen Zers have not been in the workplace, numerous studies indicate they have an advantage over older Millennials. According to Dan Schawel, founder of Millennial Branding, “They (Gen Z) appear to be more realistic instead of optimistic, are likely to be more career-minded, and can quickly adapt to new technology to work more effectively.” He adds, “they come to the workplace better prepared, less entitled and more equipped to succeed.”
Coinciding with college education, many in Generation Z are born to more affluent families with parents having relatively higher education than previous generations. Expressed in constant 2017 dollars, Generation Z ages 6 to 21 in 2018 lived in households with an average income of $63,700 – 2.1 percent higher than Millennials in 2002 (Figure 2). In 1986, Gen Xers lived in households with an average income of $52,800 – 20.6 percent below today’s Generation Z.
Media and Shopping Preferences
Because the internet/smartphones and brick and mortar shopping have always been a part of the fabric of Generation Z, it has never been an either/or experience, but rather the two meld together. Smartphones serve as support for the brick and mortar shopping experience, not a competition to it.
Gen Z are “more traditional shoppers than Millennials,” said Katherine Cullen, director of retail and consumer insights for NRF. “They are killing the idea that online and offline are separate.” It will be interesting to see as these young Gen Zers age into personal credit cards if their shopping habits move more online.
According to Brandon Pierce at SPS Commerce, the previous generation of Millennials “is accused of killing this or that industry (also television sitcoms, traditional sit-down dinner dates, golf and of course, retail shopping at malls and stores). In reality, they’re only disrupting the way things have been. They still buy the products they want, consume media like movies and shows, buy groceries and eat food from restaurants. They just prefer to go about it differently. It’s a matter of needing to change old, traditional ways of marketing and selling to keep up with a younger generation’s preferred way of living. Basically Generation Z is going to be an intensified version of the Millennial tidal wave of change.”
Studies and surveys are being published almost monthly, detailing how young Gen Zers currently shop. As shown in Table D, currently 98 percent of Gen Zers prefer to shop in brick and mortar stores, while almost half (46 percent) research items on smartphones before making in-store purchases. 60 percent prefer the mall to shopping – likely due to socialization and inability for younger teens to drive to multiple retail locations. 70 percent influence family decisions regarding items such as furniture, household goods, and food and beverage.
In a survey by the IBM Institute for Business Value, “Uniquely Gen Z,” Gen Zers were questioned on items most purchased themselves and purchases by their parents they heavily influenced (Table E). The top purchased items by Gen Zers are clothes and shoes, books and music, apps and toys and games – over 50% of respondents choosing these items. While a low amount actually bought furniture themselves (15 percent), 76 percent responded that they have influenced parents on furniture purchases.
With the influx of Millennials, many brick and mortar stores strengthened online capabilities. Now arrives Generation Z demanding a fully integrated shopping experience forcing internet-only companies to turn toward brick and mortar options.
June 9,
2019 by HFBusiness Staff in Business Strategy, Industry
Across Distribution Channels
As expected, in major distribution channels that market furniture and home furnishings, retail management occupations carry the higher salary positions. Within management occupations, electronic shopping and mail-order houses pay the highest wages – both sales managers and purchasing managers -- earning a median annual salary above $115,000 (Table A). In general, purchasing managers earn the most among the management occupations – all above $100K, regardless of the distribution channel. Among administrative services managers, home furnishings stores paid the greatest median annual wage of $112,570. Furniture stores were near the bottom at $77,240.
Non-managerial occupations have been divided into two charts for clarity – Table B (Part 1) and Table B (Part 2). As a whole non-managerial positions among furniture and home furnishings retailers carry much lower wages than managerial positions. As shown in Table B (Part 1), by far both business and financial operations and computer and analytical jobs have the highest earnings in the non-managerial category – all earning over a $26 median hourly wage with the exception of building material and supplies dealers paying computer and analytical positions $19.42 an hour. Furniture Stores and Home Furnishings Stores are near the bottom at hourly wages of $27.24 and $26.92 respectively for business and financial operations occupations, compared to $29.54 for the top paying pure e-commerce companies. In computer occupations, Furniture Stores at $31.68 an hour are near the top, only exceeded again by pure e-commerce retailers at $40.76.
Shown in Table B (Part 2) are non-managerial occupations -- design, sales, office and administrative, and various warehouse and delivery positions. General merchandise stores is the lowest paying channel for non-managerial occupations, while electronic shopping and mail-order houses are the highest. Sales, office, and transportation occupations earn the lowest in non-managerial jobs – many below $15 an hour. Design/arts/media positions in furniture stores are the second highest earnings among the select distribution channels at $19.09 per hour, second to pure e-commerce and mail order retailers at $24.26. In sales and related occupations, furniture stores pay a median of $14.49 per hour while home furnishings stores are lower at $12.07. Interestingly, qualified installation, maintenance and repair occupations are among the highest paid non-managerial occupations across all of the selected distribution channels, with furniture stores averaging $17.83 per hour and home furnishings stores $18.59. As a group, transportation and material moving occupations are the lowest paying positions.
Number of Employees
With the exception of electronic shopping and mail-order houses, all the major furniture and home furnishings distribution channels have cut the number of employees since 2006 (Table C). The greatest loss occurred between 2006 and 2012 when furniture stores reduced employees by (-25.2) percent and home furnishings stores by (-11.9) percent. Since then, the distribution channels (except for electronics and appliance stores) have hired employees to fill the stores that survived the recession but amounts are still shy of pre-recession levels. Last year, the furniture industry employment totaled 224,390 and home furnishings store another 255,910.
Furniture and Home Furnishings Stores:
Management Occupations
Drilling down from the broad management occupation categories into more detail for furniture stores and home furnishing stores, with the exception of administrative service managers, wages in furniture stores are generally higher. In 2018, administrative service managers in home furnishings stores were the highest paid management positions, earning a median annual wage of $112,570 compared to the same occupation earning $77,240 in furniture stores (Table D). This represents a 42.4 percent increase from 2012 to 2018 for home furnishings stores administrative service managers compared to a 21.4 percent increase in furniture stores (Figure 2). In furniture stores, financial managers are the highest paid management positions averaging $114,600 annually. Purchasing managers are the second highest management position in furniture stores at $107,180, similar to wages of $107,400 in home furnishings stores. Purchasing managers earnings increased 2012 to 2018 by 45.3 percent and 20.6 percent, respectively (Figure 1).
On average, neither general managers, sales managers nor transportation, storage, and distribution managers have broken the $100,000 ceiling. In addition, the earning of GMs in furniture stores and home furnishings stores have had the lowest increase of all management positions over the last five years, growing only 1.6 percent and 0.9 percent respectively 2012 to 2018. GMs in furniture stores earned over $5,000 more annually than those in home furnishings stores – sales managers more than $13,000 and $15,000 for transportation and distribution managers (Table D and Figure 1).
Non-Managerial Occupations
Art and Design Occupations
Non-management wages are reported in hourly wages. Interior designers in furniture stores have shown consistent median hourly wage growth (14.1 percent) from 2012 to 2018, compared to the much slower growth pace in home furnishings from 2012 to 2018 of 3.9 percent. (Table E and Figure 2). In 2018, Interior designers earned a higher median hourly wage in furniture stores ($21.90) than in home furnishings stores ($19.75).
Median hourly wages of merchandise displayer and window treatment occupations are consistent between both channels – earning between $15 and $16 an hour in 2018 (Table E).
Sales and Related Occupations
As shown in Table F, sales and related occupations are among the lowest paying jobs in furniture stores and home furnishings stores. These have also been the slowest in earnings growth. In both distribution channels, cashiers earn a median hourly rate below $12. Wages continually dropped for cashiers through 2012 to 2015 (Figure 3), before growing in recent years – most likely due to minimum wages going up in many cities and states. Retail salespersons make more in furniture stores with a median hourly wage of $13.94, compared to $12.40 in home furnishings stores. The most startling statistic is that between 2012 and 2018, earning for retail salespersons in furniture stores grew only 6.5 percent and 5.9 percent in home furnishings stores (Figure 3).
Office and Administrative Support Occupations
By far, executive secretaries and executive administrative assistants are the highest paid among office and admin support jobs – earning a median hourly rate of $29.20 in furniture stores and $26.68 in home furnishings stores (Table G and Figure 4). The executive admin jobs also had the largest increases from 2012 to 2018 – jumping 32.5 percent in furniture stores and 29.8 percent in home furnishings stores.
Lowest paid among these positions are customer service reps, receptionists and information clerks, and stock clerks and order fillers – all earning less than a $14 median hourly wage.
Transportation and Delivery
Among transportation and delivery occupations in furniture and home furnishings stores, installation, maintenance, and repair workers are among the highest paid non-managerial positions, earning a median hourly wage of $17.83 in furniture stores and $18.59 in home furnishings stores (Table H). Although light truck or delivery services and drivers earn considerably less at $13.10 and $15.47 respectively, their wages have increased by 17.5 percent and 21 percent since 2012.
No doubt furniture and home furnishings stores are feeling the pinch of increasing wages. With salaries going up nationwide, furniture and home furnishings retailers should be focusing on where to place their bucks so they can get the most bang in terms of competent employees that will add to the bottom line.
May 13,
2019 by HFBusiness Staff in Business Strategy, Industry
But while consumers are staying relatively optimistic, CEOs have been generally pessimistic over the last six months. According to the Conference Board’s March report, CEO confidence during the first quarter of 2019 was 43 – up 1 point from last year’s fourth quarter. Note that a reading of more than 50 points reflects more positive than negative responses. In the fourth quarter of 2018 the CEO confidence was at its lowest in six years. After years of recovery and huge Consumer Confidence Index (CCI) increases, current Consumer and CEO Confidence point to an overall perception of moderation in economic growth. This article picks up from Statistically Speaking’s November 2015 article Consumer Confidence Drives Furniture Spending.
As shown in Table B, the Consumer Confidence Index declined in March, after increasing in February. The Index in March stands at 124.1 (1985 = 100), down 7.3 points from 131.4 in February. Other indexes tracked by The Conference Board get less attention than the CCI, but nonetheless offer additional perspectives. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – declined 12.2 points, from 172.8 to 160.6. Though this index shows a decline, again indicating a possible moderation in growth, the numbers are still high. The Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – decreased from 103.8 last month to 99.8 this month.
Since the bottom of the Great Recession in 2009, the U.S. has experienced continuous and historic growth. Although year-to-date Consumer Confidence in 2019 has taken a dip from the high of 130.1 (average) in 2018, confidence continues to be high at 124.1 in March (Table C).
Table D shows the swings in consumer attitudes over a given year. Each year since 2013, the annual average index finished higher than the previous year. March of this year saw confidence dip slightly below March 2017 and March 2018.
Historically, consumers appear to be most confident in the third quarter of each year, and the least confident in the fourth quarter. The average confidence level from 1970 to 2018 was 94.1 in the third quarter, compared to 90.9 in the fourth quarter (E).
Consumer Confidence and Economic Indicators
In a sense, the CCI is a lagging indicator in response to several economic catalysts, among them the health of our jobs market, growth in wages, and the GDP. Confidence tends to fluctuate more strongly than actual economic data. As shown in Table F, after a kneejerk reaction 2007 to the bottom of the Recession in 2009, Consumer Confidence tended to mirror the growth in personal income and the rising value of goods and services with the CCI responding more sharply to economic downturns.
During the Great Recession, the number of employed U.S. workers peaked historically in 2007 at 138 million workers, but dipped 4.5 percent before bottoming out in 2010. Since then, the number of employed workers has risen by 14.4 percent – roughly 1.8 percent a year from 2010 to 2018, with growth continuing in the first quarter of this year to a total of 150 million employed workers in March.
Meanwhile personal income and the GDP fell only slightly during the recession but quickly gained momentum after 2009 – personal income increasing 46 percent and GDP by 42 percent.
Consumer Confidence and Goods and Services
Consumer Confidence is perhaps the prime external driver of consumer spending. Population and household formations form the base for growth in spending; however, Consumer Confidence drives demand, especially when it comes to durable goods. Table G shows the indexed growth of selected products. Note: Data for the first quarter of this year was not available at press time.
New Motor Vehicles follows a similar trajectory as Consumer Confidence with personal consumption dropping dramatically from 2007 to 2009 (down 29 percent) before growing by 71 percent from 2009 to 2018. Also taking a nose dive of 15.8 percent in 2009, consumption of Furniture and Home Furnishings items has since continued an unwavering climb – up 44 percent by 2018. Since 2017, however, spending on Furniture and Home Furnishings has not kept pace with the rising confidence levels. After peaking in 2008, the Video and Audio Equipment industry has declined and remained flat with a slight increase from 2015 to 2018 of 5.9 percent.
Consumer Confidence has a lesser impact on non-durable goods, which tend to avoid the peaks and valleys of confidence swings more so than durable goods. As shown in Table H, consumers may slow non-durable purchases like food and clothing, but only significantly during periods of extremely low confidence. Gasoline and other motor fuels tend to follow a different pattern based on price, availability, and seasonal changes in demand.
Similar to non-durable goods, consumer spending on services did not show massive declines in consumption during the recession despite the plummet in Consumer Confidence (Table I). Since 2009, consumer spending on healthcare, eating out, and foreign travel has skyrocketed. Healthcare spending has increased by 60.7 percent since 2007.
Spending on eating out and foreign travel both dipped slightly in 2009, but have since grown by 53.9 percent and 85.2 percent, respectively.
Consumer Confidence and Housing
The other piece of the consumer spending pie is housing, especially new home sales. Economic conditions drive the homebuilding industry and once building slows, it takes a while for housing starts to catch up once the consumer starts to regain confidence. As shown in Table J, Consumer Confidence has well exceeded new home sales and housing starts – surpassing both in 2013. Due to low inventory across the housing industry, consumer spending on new homes cannot keep with demand and the positive economic outlook. Indications in the first quarter of this year show stronger new home sales, but a disappointing period for housing starts. Meanwhile, existing home sales for the first two months of this year are still down 3.9 percent compared to last year even though February sales are 11.8 percent over the previous January.
Consumer Confidence and the Future
How high can Consumer Confidence go before a downturn in the economy? Ten years out from the last recession, many economists are predicting the next one. Figure 1 paints a daunting picture of the pattern of high Consumer Confidence followed by a recession. At an index of 140.1, 2000 was the most confident year on record before plummeting down to 78.6 by 2003. After climbing back up to 105 in 2006 and 2007, the U.S. experienced its least confident year on record with an index of 45.2 in 2009.
According to a February survey from the National Association for Business Economics, half of 280 business economists think a downturn in the economy will occur by the end of next year and 75 percent believe the U.S. will be in a recession by 2021.
April 1,
2019 by HFBusiness Staff in Business Strategy, Industry
Furniture purchases detailed in the Consumer Expenditure Survey (CE) include all indoor household furniture and bedding purchases plus outdoor furniture sold to consumer units. The data excludes all other home furnishings, including lamps, accessories, tableware, textiles, window treatments, carpets and rugs, televisions and major appliances.
The definition of consumer unit is closely aligned to households. (As noted in the Methodology, the survey data collected by the CE generally reflects 63 percent of the final furniture industry consumption published by the PCE and tied to the GDP.)
Zeroing in on the prime 35 to 44 consumer age group, Table A shows they spent on average $663 on furniture products in 2017 – the highest of the age segments. Over half of these older Millennials and younger Gen Xers are now homeowners (54 percent). Many older Millennials are just now settling down, making more money, purchasing homes and buying furniture.
But don’t discount the many younger Millennials (ages 25-34) who are also contributing to higher furniture expenditures. At an annual average expenditure of $538, ages 25 to 34 are spending more on average annually than ages 45 to 54 ($517). These younger Millennial purchases are especially important because many reflect single-person households as opposed to dual-income married couples in the 35 to 44 age group.
Younger Baby Boomers are still leaving their mark on the furniture industry with the 55 to 64 age group posting the second highest annual furniture expenditure at $543.
Regardless of age, as with most durable goods purchases, following the money tells a broader story of the purchasing power of higher income households and the squeeze on the middle class. High income earners spent three- to-four-times the level of middle class households in 2017 (Table B). The jump among higher income households – those earning above $100,000 – is quite dramatic. Households with incomes $150,000 to $199,999 spend on average $1,132 a year compared to $770 for those earning between $100,000 and $149,999 – a 61.7 percent increase. High incomes over $200,000 are averaging $1,591.
Marriage and children play a huge role in a consumer’s furniture buying needs. Typically marriage leads to buying a house and furnishings. When kids come along, households have furniture buying needs for years to come as families grow. As Table C shows, young married families starting out where the oldest child is under 6 had the highest average furniture expenditure at $886. These families, often dual-income earners, place a high priority on home furnishings. Most often this is their first home purchase. The next older cohort, married households with children between 6 and 17 years of age spend 12 percent less at $780 annually. At this life-stage additional family commitments begin to compete for household dollars – such as expenditures for school activities and sports, dental braces, teenage automobile costs, and private schools among higher income earners.
While married couples with the oldest child under 6 spent the most per consumer unit/household, this segment only accounts for 7.2 percent of the total furniture expenditures (Table D). If Millennials seriously start to embrace the traditional American Dream – get married, have children, and buy a house – it will be a huge boom for the furniture industry. Married couples without children appear to control the largest portion of furniture purchases at 32.3 percent while single consumer units without children spend 25.7 percent. Married couples with the oldest child over 18 only reflect 8.6 percent of furniture purchases as parents plan for the next life-stage – children in college.
Table E shows the annual average furniture expenditures by different occupation type. By far, managers and professionals, with their higher incomes, had the highest average annual expenditure at $740, 41 percent more than the second highest spender, construction workers and mechanics. Construction workers and mechanics spent an annual average of $523 in 2017, slightly more than self-employed workers at $516.
Not only do managers and professionals spend the most on furniture annually, this group also comprises a substantial portion of the U.S. workforce controlling 35.5 percent of total furniture expenditures. Retired Baby Boomers are second, with 16.9 percent of sales. The occupation category that controls the third largest segment of the industry - technical, sales and clerical workers – contains some of the lowest spenders per household at $476 annually; however, their sheer numbers put their industry presence at 13.8 percent of total dollars. Service workers, also among the lowest in expenditures at $407 still represent 10.5 percent of industry sales (Table F).
Where people live also influences how much they spend on furniture each year. Larger cities seem to command the higher salaries, but also higher costs of living. Households in America’s mega markets with over 5 million in population, do not, in fact, spend the most on furniture. As shown in Table G, bigger cities, but not the largest urban areas, with populations between 2.5 million and 5 million – had the highest annual furniture expenditures at $669 in 2017.
Although the larger, densely populated areas spend more per household, the greatest share of total furniture purchases, 21.7 percent, are from households living in mid-sized urban areas with a population of 250,000 to 999,999 (Table H).
With the majority of larger U.S. urban areas in the Northeast, it is not surprising the region has the highest annual furniture expenditure at $587 (Table I). And even though the South has the lowest expenditures per households at $470, because of the region’s size, the South accounts for 35 percent of total furniture spending – well above the other three regions (Table J)
The Consumer Expenditure Survey selected representative markets to drill down to household characteristics and total household furnishings and equipment expenditures. Figure 1 gives a breakdown of MSAs with the highest amount spent on household furnishings and equipment. St. Louis topping the list with an expenditure of $3,465 might come as a surprise, but is in line with the urban size analysis in Table G. and the high homeownership rate of 75 percent makes sense.
Household furniture purchases are driven by a combination of life stages, with the two highest spenders at opposite ends. The first is young married couples ages 35 to 44 starting out buying homes and having children. The second on the opposite end is seniors retiring, taking stock of their financial good fortunes, making new lifestyle choices, and buying furniture. The problem is these Baby Boomers are aging out of the 55 to 64 age group rapidly, and the younger Millennials have been slow to embrace the traditional married-homeowner-children path. But if the economy can stay healthy, everyone is looking to the Millennials to make up for lost ground.
March 11,
2019 by HFBusiness Staff in Business Strategy, Economic News, Industry
Overall, personal consumption expenditures have risen 41.6 percent post-recession with the majority of consumer spending – roughly two-thirds – absorbed by services and the amount increases every year. According to the government’s Bureau of Economic Analysis (BEA), Healthcare costs now surpass total housing expenditures at $3.10 trillion versus $2.98 trillion in 2018. Combined healthcare and housing consume much of America’s paychecks. Although services will continue to eat away at consumer dollars with rising housing rents and mortgages, overall consumers are confident in the economy. Spending on durable goods is on the rise and has increased by 44 percent since 2009. Consumer spending on furniture alone has increased 7 percent over the last year to $114.6 billion in sales outpacing the growth other home furnishings products.
This article picks up from Home Furnishings Business July 2017 issues’ Statistically Speaking Consumer Spending Update. A comprehensive historical revision to Consumer Spending statistics in the second half of last year by the BEA confirmed what many furniture retailers tried to tell us all along. Specifically, that growth in furniture spending coming out of the Recession ending in 2009 was not as robust has first published (Table A). The Bureau of Economic Analysis lowered estimates of furniture spending beginning in 2011 and which has cumulated to an 8 percent correction that has carried through 2018.
Services, Durable, and Nondurable
Over the last five years, between 2013 and 2018, services have increased to 68.8 percent of consumer spending – from $7.6 trillion to $9.6 trillion in consumer dollars (Table B). Nondurables have declined as a percent of spending, down from 22.2 percent to 20.7 percent during the same time period. While spending for durable goods has not shifted as a percent of consumption since 2013 staying at 10.5 percent, total sales have increased by 22.7 percent.
As shown in Table C, both durable goods and nondurable goods lost tremendous ground from 2000 to 2009 as spending on services skyrocketed by 54.6 percent while consumer spending on housing and healthcare services steadily increased. On a positive note, in the years following the recession (2009 to 2018), durable goods have surpassed growth in services and nondurables, increasing 44.2 percent compared to 44.0 percent for services and 32.9 percent for nondurables.
Top Consumer Spending
Healthcare now exceeds total housing and home furnishings – accounting for 22.2 percent of consumer spending in 2018. The share for total housing and home furnishings has also increased slightly by 0.2 points, mainly due to rising rent and mortgage prices in a competitive housing market. Motor vehicles have dropped spending share by 1.2 points. Meanwhile Americans are eating out more, with corresponding spending on food/groceries consumed at home declining. In 2018, consumers were spending a greater share of expenditures on financial services – up 5.2 percent from 4.9 percent in 2013 (Table D).
Housing and Household Expenditures
Since the recession, renter-occupied housing has surged as the fastest growing housing expense – up 86.4 percent since 2007 (Table E). Both household insurance and owner-occupied housing expenditures have also grown at a fast pace, increasing by 40.8 percent and 47.5 percent respectively. Major household appliances have shown steady growth, while televisions have fallen flat and outpaced by other household spending. Surprisingly, tools and equipment for house and garden have skyrocketed the last few years – jumping 43 percent since 2012.
As Americans are staying put longer, household maintenance spending has grown an average of 4.8 percent a year from 2011 to 2016. 2016 to 2017 saw a dip (-0.8 percent) in housing maintenance but the numbers picked back up last year – growing 3.8 percent. Last year, rents and mortgages both saw a high growth of 4.5 percent and 4.4 percent as supply continues to tighten in many areas. Furniture has shown the most growth over the past year, rising 7 percent after an average yearly increase of 4.6 percent from 2011 to 2016.
Figure 1 itemizes the growth of housing and home furnishing expenditures five years 2011 to 2016 (CAGR), one year (2016 to 2017 and 2017 to 2018) and one year point change.
Furniture and Home Furnishings Products
In 2018 through November annualized, consumer spending on furniture alone totaled $114.6 billion dollars. Major household appliances is the second largest home furnishings spending category at $41.4 billion, followed by clocks, lamps, and lighting fixtures at $39 billion and televisions at $31.7 billion (Table G).
Although window coverings is the smallest of the home furnishings categories, it has experienced the largest post-recession surge in consumer spending – increasing 67.7 percent since 2007.
Table G depicts the decline of all the major furniture and home furnishing products from 2007 to 2009 and subsequent rise post-recession. Spending on carpets and other floor coverings, the most affected home furnishings category, has slowly increased since 2012 but still shy of 2007 expenditures. As of November 2018, spending on furniture is 13.7 percent higher than pre-recession amounts in 2007.
As depicted in Figure 2, all home furnishings categories except for televisions exceeded 3 percent average annual growth from 2011 to 2016. Spending on televisions had an average loss of (-0.2 percent) over five years but has rebounded slightly – increasing 4.3 percent last year. By far, furniture and window coverings have shown the most consistent growth from 2011 to 2018.
Table H shows the spending categories with highest increases and decreases from 2017 to 2018. Gasoline and other energy goods top the “winners” list at 13.4 percent growth, followed closely by truck leasing at 13.2 percent. More people are affording vacations and travel as passenger fares for foreign travel are up 12.0 percent. Entertainment is a big winner with motion picture theater ticket sales up 11.4 percent, video streaming and rentals growing by 9.2 percent and newspapers and periodicals increasing 9.0 percent last year.
New auto sales top the list of “losers”, posting a 9.5 percent decline with second place going to spectator sports. Not surprisingly, land-line telephone services have declined by 6.7 percent – placing the spending category third on the list.
The latest comprehensive revisions by the BEA to the U.S. National Accounts have several significant takeaways. First, personal income appears to have been under-reported for years, especially from small businesses. Secondly, the revised savings rate for individuals is no longer at historic lows and is about average to the levels seen since 1990. Also, the relationship between personal spending and income is no longer at historic highs. This all means that our economy may have even more room for expansion than originally thought which should bode well for the furniture and home furnishings industries.