Michael A. Dunlap & Associates, LLC unveils the results of its October 2018 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 October 2018 survey highlights are:
Gross Shipments Index:
60.37 = October 2018 Index
58.13 = 55 Survey Average Index
The October 2018 index of 60.37 is significantly above the 58.13 survey average. The previous all-time high and low were in July 2018 (66.86) and July 2009 (41.40).
Order Backlog Index:
60.74 = October 2018 Index
57.63 = 55 Survey Average Index
The October 2018 Order Backlog Index of 60.74 is and well above the 54 survey average and is remarkably very strong. (The July 2018 Order Backlog Index of 66.57 an all-time high).
We still see this as a positive indicator for industry sales for the 4th Quarter of 2018 and into the 1st Quarter of 2019.
52.22 = October 2018 Index
52.53 = 55 Survey Average Index
The Employment Index measures the degree of increase or decrease in employment levels. The October 2018 Index 52.22 is slightly lower than the 55 survey average.
In West Michigan and many other industry locations, labor shortages are driving up wages but increased hiring remains steady.
Hours Worked Index:
60.42 = October 2018 Index
55.89 = 55 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. This is an anomaly as Hours Worked are higher, but employment is lower.
We think this is reflective of the inability to fill both entry level and skilled positions are driving up hiring and hours worked. Overtime is now the norm, not the exception.
Capital Expenditures Index:
52.31 = October 2018 Index
55.87 = 55 Survey Average Index
Historically, the Capital Expenditures Index has steadily been in the mid to upper 50's. The October Index of 52.31 is significantly lower than average. We will monitor this closely in future surveys. The all-time high was 64.74 in April 2017.
Tooling Expenditures Index
54.81 = October 2018 Index
56.55 = 55 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 decrease during the 3rd Quarter is a surprise. It is notable that the April 2017 Index of 66.65 was the previous all-time high.
New Product Development Index:
60.38= October 2018 Index
63.35 = 55 Survey Average Index
The October 2018 Index of 60.38 is well below the 55 survey average. This is also a surprise.
The highest we have experienced was the April 2015 Index of 69.70.
Raw Material Costs Index
37.69 = October 2018 Index
44.81 = 55 Survey Average Index
Many commodity prices in the 3rd Quarter of 2018 have increased significantly, primarily due to the increased import tariffs. Through 2015 and into 2016, the average was (50.95). The current index indicates that material costs will likely dampen profitability unless selling price increases can offset these additional costs. This is not a likely scenario.
Employee Costs Index
45.77 = October 2018 Index
46.58 = 55 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
64.81 = October 2018 Index
58.84 = 55 Survey Average Index
The strong index is good news at it has remained over “61” for the past 19 Quarters. This is remarkable and most certainly gives a boost to the Overall Index.
The October 2018 Survey is 54.98 are dampened primarily by the Raw Materials Index and Employee Costs. Purely by circumstance, he 55 Survey Average Index is also 54.98!
It can be argued that October 2018 is “just an average month”, but that would be very dismissive of a very good quarter! Ten different elements affect this index.
The highest recorded Index was 59.72 in July 2005 and the lowest was 41.45 in April 2009 during the bottom of the recession.
Dunlap commented “The industry remains solid. The Overall Index is strong and is steady at the 54.98 Survey average.
“I feel good about where the industry is currently. 2018 will finish on the same path, but the current political uncertainties, the effect of the mid-term elections, tariff and trade questions, and the resulting economic climates still make predictions into 2019 uncertain.
Dunlap further stated,
"During the 2nd quarter, the slowdown with some of the large public companies indicated a general decline in the industry performance. At MADA, we disagreed the and we continue to be bullish,
“We are surveying many more than five or six companies. The growth is coming from the smaller under $50.0 Million sales and fewer than 250 employees. I am still pleased to see the strength of the Personal Outlook Index. It’s 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, transportation and logistics costs, steel prices, and general material 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 64% 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 October 2018 MADA / OFI Trends survey was sent to more than 500 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 January 2019.
For further information, please contact:
Mike Dunlap at
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.