Who’s Winning the Trade Balance? de Facto Furniture

November 30, 2007  by in UnCategorized   

By Home Furnishings Business in on December 2007 It’s all too easy to overlook the importance of the U.S. furniture market to one of our largest trading partners: Canada. For years, the import story has focused on the rise of the Asian furniture vendor. The importance of the Canadian furniture market to the U.S. furniture market—and vice versa—has been virtually ignored.

Canadian upholstered furniture exports to the U.S. exceeded upholstered imports in four of the last five years, making it a desirable destination for Canadian vendors. In the fifth year, 2006, the tables turned, with the upholstered furniture trade
balance of $18.4 million turning in the favor of Canadian vendors.

In 2003, Canadian upholstery exports to the U.S. were large enough
to give the Canadians the overall lead in total furniture exports.
The winning margin, however, was less than $1 million. Since that time, Canada imported more furniture from the U.S. than it exported.

It’s not just the desirability of U.S. furniture imports that is turning the Canadian market into a valuable destination country. Year by year, currency exchange rates have turned, making the Canadian market even more attractive.

At the end of 2002, one U.S. dollar was equal to $1.58 Canadian dollars, making U.S. furniture more expensive for Canadian consumers. At the end of 2006, that same U.S. dollar was equal to $1.17 Canadian dollars. By the end of June of this year, the U.S.-Canadian exchange rate was nearly equal, with one U.S. dollar having the purchasing power of $1.06 Canadian dollars.

As currency exchange rates equalize, the design, cost and desirability of furniture on both sides of the U.S.-Canada border become the dominant factors in which country is winning the furniture trade balance.

In 2006, Canadian furniture exports to the U.S. exceeded imports by $239.5 million. Five years earlier, the difference, also in Canada’s favor, was $21.9 million. The one furniture product with the greatest effect on the balance of trade was upholstered furniture. 2006 was the only year in the past five in which upholstery exports out of Canada exceeded upholstery imports into the country.

It’s not just upholstered furniture exports that have improved, from the Canadian point of view. Compared with 2002, the 2006 case goods trade balance was virtually flat. In that same five-year period, the trade balance of other types of furniture increased 9 percent, and bedding exports exceeded imports by 274 percent.

In the five-year march of time from 2002 to 2006, Canadian imports of U.S. upholstered furniture more than doubled, from $127.3 million to $265.8 million. Case goods shipments for the same period fell by three percent, from $104.4 million to $101.7 million.

Other residential furniture imports into Canada from the U.S. increased 9 percent from 2002 to 2006 and bedding shipments nearly quadrupled, reaching $45.4 million in 2006.

Overall, U.S. furniture imports into Canada grew by 56 percent from 2002 to 2006.

For that same five-year stretch of time, upholstered furniture exports from Canada to the U.S. slipped 15 percent, falling from $289.7 million in 2002 to $247.4 million in 2006. Case goods exports in 2006 were $854.8 million, off 5 percent from 2002’s $904.1 million.

Canadian exports of other residential furniture to the U.S. increased 2 percent from 2002 to 2006 and bedding shipments grew 74 percent, from $28.3 million to $49.4 million.

Total Canadian furniture exports to the U.S. in 2006 were off 5 percent from 2002 totals.

One of the major advantages that both the U.S. and Canada have over their Asian competitors is their geographical location. Shipping furniture between the countries is usually easier than moving it from Asia to North America.

Once you remove currency exchange rates from the furniture trade equation, the implication is clear—vendors on both sides of the border must remain sharp in order to keep furniture shipments flowing between the two nations. No longer can U.S. vendors depend on a favorable Canada-U.S. exchange rate. Their goods are no longer the bargain in the Canadian market that they used to be.

The good news is that U.S. furniture vendors are used to keeping costs down and quality up. Running lean and mean is a fact in today’s global economy. The wise U.S. vendor understands that Asian imports are a major factor in both the U.S. and Canadian markets, but the trade ties between the two nations are as strong as ever.