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From Home Furnishing Business

Statistically Speaking: Furniture Industry Continues to Face the Headwind of Inflation and Market Instability

The furniture industry wonders if it will ever see plain old steady industry growth again. The Covid 19 pandemic sent the industry into a roller coaster ride in 2020 that was followed by a historical surge in consumer spending resulting in a 21.9% growth in furniture and bedding sales in 2021. But escalating inflation knocked that 2021 growth almost in half in terms real growth, down to 12.7%. In 2022 a positive industry growth of 5.2% was adjusted to a negative 6.3% loss due to inflation. Finally last year inflation began to ease. Industry sales slowed resulting in no growth (-0.4%) with real growth adjusted for inflation at 1.2%. During the first two months of this year inflation is still hanging around, but according to the Federal Reserve at acceptable levels. Table A shows the comparison of growth in current dollars versus real dollars.

Since the end of 2019 when the economic chaos began, furniture industry sales grew 39.7% in current dollars, but only 16.9% in real dollars (Table B).

During this period, external factors were impacting the furniture industry including increasing disposable income, worker shortages, and growing wages and salaries. During 2020 and 2021, the consumers’ newly renewed interest in their homes, aided by government stimulus money, kept furniture sales growth ahead of both disposable income and wages and salaries increases. Especially in 2021, inflation-adjusted industry growth of 12.7% outpaced the real growth in personal disposable income of 3.1% and wages and salaries in real dollars of 4.1%. (Figure 1). But by the end of last year real growth for furniture had fallen to 1.2% compared to 4.2% increases for disposable income and 2% growth for wages. The consumers put their wallets back in their pockets when it came to furniture.

The worker shortage featured frequently in news, jumps out at you in Table C. Between 2019 and 2023 wages and salaries increased 26.2% in current dollars (19.2% inflation adjusted-real dollars) while the number of employed workers grew only 2.2.%.

Population growth took a hit during 2020 and especially 2021 when the pandemic was at its worst. While the country continued to grow, it slowed to only 0.17% increase in 2021, the first time since 1937 that the population grew by less than one million people (Figure 2).

Markets Respond to Economic Upheaval
The nationwide picture of industry sales growth between 2019 and 2023 varied by state and especially by market type, whether metropolitan statistical area (MSA), micropolitan statistical area (Micro SA) or rural communities. Figure 3 gives a detailed overview of industry sales and growth by these market types. Between 2019 and 2023, the industry grew to $150.19 billion dollars, an increase of $42.67 billion dollars over the four years. Over 91% of that growth occurred in MSAs, the best performing markets. MSAs grew 39.9% in sales during the period, while micro statistical areas trailed increasing 37.4% and rural areas designated in 46 states by 36.7%.

The 404 U.S. MSAs control 91.2% of industry sales, a higher percentage than their share of personal income (89.4%) or employed workers (87.6%). Part of this can be explained by consumers living in smaller micropolitan and rural areas travelling to larger markets to shop for furniture, either online or in person. As smaller Mom and Pop furniture stores have closed over the years in smaller areas, local choices have steadily disappeared (Table D).

The cumulative growth in furniture industry sales, personal income, and employment by market type between 2019 and 2023 is further detailed in Figure 4. Of special note is that while employment grew 2% during the fouryear period, that growth occurred in MSAs while Micro SAs and rural areas lost workers. Personal income, however, grew slightly more in Micro SAs and rural areas than MSAs – 18.9% in MSAs compared to 19.5% in Micro SAs and 19.9% in rural areas.

Size of Market Matters in the Furniture Industry
Of the 404 MSAs scattered across the U.S., over 20% of industry sales occur in nine mega markets that each have over $2 billion in industry sales annually. These nine mega markets (names shorted here) are listed largest to smallest: New York (NY-NJ), Los Angeles, Chicago, Houston, Atlanta, Dallas, Washington (DC-VA-MD-WV), Phoenix and Seattle. The largest market, New York totaled $5.59 billion in industry sales last year, and the smallest Seattle, $2.13 billion. Behind these nine markets are 32 MSAs with industry sales between $1 billion and $2 billion annually, that control 29.5% of the industry. Table E shows the percentages and Figure 5 the complete detail of sales and growth of all market sales ranges.

The best performing segments of MSAs during 2019 to 2023 as a group were the second tier MSAs with annual sales of $1 billion to $2 billion. These markets as a group grew 41.1% over the four years, but when adjusted for inflation grew 18.1%. Table F shows the current and real growth of all market sales ranges.

The detail in Figure 5 consolidates the performance statistics of the MSA sales ranges. The external factors impacting the MSA sales range segments between 2019 to 2022/2023 are shown in Figure 6. Of note is that the second-tier markets with $1 billion to $2 billion dollar industry sales had the highest growth in personal income at 21%, compared the largest markets with 16.4% increase. These second tier $1 to $2 billion dollar markets also had the highest percentage growth in employed workers at 3.3%. Looking at population growth, it is interesting to note that smaller markets with $250 million to $499 million had a much higher percent growth in population at 3.1%. Meanwhile, the mega markets over $2 billion posted the lowest growth at 1.1%. Many residents of these mega markets fled to smaller areas due to Covid, remote working opportunities, and social problems within their city cores. Figure 7 features the three top and bottom performing MSAs within each of the seven MSA industry sales ranges. Also noted on these markets are indicators if they were also in the top (T) or bottom (B) three in growth last year in external factors within their MSA. External factors are population, and jobs growth. This illustrates how external factors and industry sales go hand in hand.

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