January Furniture Survey Improves Again

Michael A. Dunlap & Associates, LLC unveils the results of its January 2019 Quarterly MADA / OFI Trends Survey, a unique tool that measures the current business activity of the commercial (office, education, healthcare, & hospitality) furniture industry and its suppliers. This survey was completed during the month of October 2018 and marks the 55th Edition. The Survey began in the summer of 2004.

The survey focuses on ten key business activities and respondents rate each area on a scale of TEN (the highest) to ONE (the lowest). These include Gross Shipments, Order Backlog / Incoming Orders, Employment Levels, Manufacturing Hours (Overtime vs. Reduced Hours), Capital Investment, Tooling Expenditures, New Product Development Activity, Raw Material Costs, Employee Costs, and the respondents’ Personal Outlook on the industry.

The unique element of this survey is the establishment of an Industry Index Number to quantify where the industry is currently performing. For example, an index of 100 means that things “couldn’t be better”, an index of ONE is “absolutely the worst” it can be, and an index of 50 means it is neutral; no change “up” or “down”.

The January 2019 survey highlights are:

Gross Shipments Index:

64.40 = January 2019 Index

58.24 = 56 Survey Average Index

The January 2019 index jumped more than four points to 64.40 is well above above the

58.24 survey average. The previous all-time high and low were in July 2018 (66.86) and

July 2009 (41.40).

Order Backlog Index:

67.92 = January 2019 Index

57.81 = 56 Survey Average Index

The January 2019 Order Backlog Index of 67.92 improved by seven points is the highest we have seen since the survey began in 2004. It is well above the 56 survey average and is remarkably very strong. The July 2018 Order Backlog Index of 66.57 was the all time high.

We still see this as a positive indicator for industry sales for the 1st Quarter of 2019 and into the 2nd Quarter.

Employment Index:

55.20 = January 2019 Index

52.57 = 56 Survey Average Index

The Employment Index measures the degree of increase or decrease in employment levels. The January 2019 Index 55.20 improved by three points is well above than the 56 survey average.

In West Michigan and many other industry locations, labor shortages are driving up wages but increased hiring remains strong.

Hours Worked Index:

59.58 = January 2018 Index

55.96 = 56 Survey Average Index

The Hours Worked Index is closely tied to the Employment Index. When the Hours Worked Index exceeds the mid 50’s (usually due to overtime), the following 1-2 quarters often see increases in the Employment Index. The Hours Worked Index slipped by less than one point from October 2018.

We think this is still reflective of the inability to fill both entry level and skilled positions

which are still are driving up hiring and hours worked. Overtime is now the norm, not the exception.

Capital Expenditures Index:

61.20 = January 2019 Index

55.96 = 56 Survey Average Index

Historically, the Capital Expenditures Index has steadily been in the mid to upper 50's. The January 2019 accelerated by almost nine points to 61.20 over the October Index. It is significantly higher than average. The all-time high was 64.74 in April 2017.

Tooling Expenditures Index

57.50 = January 2019 Index

56.56 = 56 Survey Average Index

The Tooling Expenditures Index tends to remain very steady from quarter to quarter and typically tracks along with Capital Expenditures, but the significant increase during the 4th Quarter is a nice surprise. The April 2017 Index of 66.65 was the previous all- time high.

New Product Development Index:

64.40 = 2019 Index

63.37 = 56 Survey Average Index

The January 2019 Index improved by four points and is back is above the 56 survey average. This is good news!

The highest we have experienced was the April 2015 Index of 69.70.

Raw Material Costs Index

47.40 = January 2019 Index

44.86 = 56 Survey Average Index

Many commodity prices in the 4th Quarter of 2018 remained steady. Tariffs have not subsided nor increased. Through 2015 and into 2016, the average was (50.95). The current index indicates that material costs have steadied.

Employee Costs Index

48.33 = January 2019 Index

46.61 = 56 Survey Average Index

Much like its companion Raw Materials Index, the Employee Cost Index is rarely above

50.0. Although higher healthcare costs are the most frequently identified issue that contributes to higher costs, wage increases this quarter appear to have exceeded healthcare. We expect this continue as long as we have a shortage of qualified labor.

The Personal Outlook Index

66.54 = January 2019 Index

58.98 = 56 Survey Average Index

This is the strongest Personal Outlook Index we have seen since we began the survey. It has remained over “61” for the past 20 Quarters. This is remarkable and most certainly gives a boost to the Overall Index.

Overall Index

59.31 = January 2019 Index

55.05 = 56 Survey Average Index

The January 2019 Survey Index of 59.31 is boosted by strong improvements in nine out of ten individual index values and brings it closer to the highest recorded Index of

59.72 in July 2005. The lowest was 41.45 in April 2009 during the bottom of the recession.

Dunlap commented “The industry remains very strong. The Overall Index has improved to near record levels and is well above the 55.05 Survey average.

“I feel good about where the industry is currently. 2018 will finished strong in spite of the current political uncertainties, the effect of the mid-term elections, tariff and trade questions. The effects of the current USA Government shutdown are still too early to predict general economic growth and how they may affect this industry. Dunlap further stated, “We are surveying many more than five or six companies. The “Big Nine” are experiencing excellent growth, the smaller under $50.0 Million sales and fewer than 250 employees. Are driving this industry. I am delighted to see the strength of the Order Backlog and Personal Outlook Index values. Outlook is a purely emotional question but we put a lot of value on this content.”

The most frequently cited perceived threats to the industry’s success are tariffs, travel,

transportation and logistics costs. Healthcare costs have been the most commonly cited concern from respondents since this survey process was started in August 2004.

As always, Dunlap thanked the respondents with this comment. “Over 75% of the responses come from “C” level executives who are the Chairman, CEO, COO or President of their organizations. I am always extremely grateful for their participation and support. Their suggestions and recommendations continue to be helpful to the performance and content of this unique survey.”

The January 2019 MADA / OFI Trends survey was sent to more than 600 individuals involved with the commercial furniture industry’s manufacturing and suppliers from Africa, Asia, Australia, Europe, North and South America and from companies ranging from more than $1 Billion in sales to less than $500,000 in sales. The survey repeats in April 2019.

For further information, please contact Mike Dunlap:

Phone: 616-786-3524

Mobile: 616-990-8725

e-mail: mike@mdunlap-associates.com www.mdunlap-associates.com

Michael A. Dunlap & Associates, LLC, is a consulting firm that focuses upon issues involving the working, learning, healing, and hospitality environments and furniture industries. These include Commercial Furniture Industry Trends, Strategic Business and Market Entry & Planning, Global Partnerships, & Collaboration, Mergers, Acquisitions, & License Agreements, Expert Witness Services in Products Liability, and Author, Presenter & Speaker.