An optimistic 2011. That is the overwhelming consensus by representatives of the woodworking industry who say they anticipate an improved economy — and greater sales — this year.

Also spurring hope for a better 2011 are recent projections by the National Association of Home Builders (NAHB) and other groups for gains in new housing activity and remodeling projects for 2011. In a recent statement, NAHB Chief Economist David Crowe noted, “Expected improvements in the job market and the overall economy are beginning to increase homeowners’ confidence and remodelers are seeing indications that business will pick up.”

Slow Growth for Cabinets
The cabinet industry, which relies heavily on remodeling and new home construction, still has a long way to go before it reaches the $13 billion to $14 billion in sales recorded back in 2005-2006, when housing starts were high and people were big into remodeling. “A cabinet market in the $6 billion to $7 billion range seems more realistic,” says Dick Titus, executive director of the Kitchen Cabinet Manufacturers Assn.

According to the KCMA’s most recent Trend of Business Report, 2010 cabinet sales (at November’s end) reflected an overall drop in sales of 3 percent, with custom cabinets hit hardest, down 13.2 percent, followed by stock cabinets down 5.5 percent, but offset by semi-custom, which was up 1.8 percent.

An uncertain housing market and slow, but recovering, economy will be the biggest challenges facing the cabinet industry this year, Titus says. “Predictions for 2011 are for sluggish and slow growth, in the 1 percent to 3 percent range in terms of units sold,” he adds. “The market will continue to be impacted by restrictive credit availability, foreclosures, declining housing prices, unemployment exceeding 9 percent, increased health care costs, costly new government regulations and scary national debt.”

To survive, cabinetmakers will need to increase their manufacturing efficiency, control or reduce costs and search out new business opportunities, he adds. “Strengthened supply chain relationships could be another possible positive result in 2011.” (Read more comments from Dick Titus on the state of the kitchen cabinet industry.)

Home Furniture Up Slightly
Housing and consumer confidence are among the biggest challenges facing manufacturers of residential furniture, says Andy Counts, CEO of the American Home Furnishings Alliance. The industry, though, is already in good position for growth.

“Preliminary estimates would indicate around a 3 percent improvement at retail, year over year,” says Counts. “Industry analysts project a possible 5 percent improvement in 2011, weighted primarily in the back half as we enter a strong 2012.”

“We are hopeful that the job market will continue to show signs of improvement,” he adds. “Seasonal housing sales are projected to be more in line with historic averages. This will give consumers confidence to reenter the marketplace and purchase our goods.”  (Read more comments from Andy Counts on the state of the residential furniture industry.)

Wood & Wood Products got the scoop for how the secondary woodworking markets expect to
fare in 2011. Photos courtesy of: Custom Cupboards, Harden Furniture, The Gunlocke Co.,
Modern Woodcrafts, Zepsa Industries and Northway Industries.

A poll by the Woodworking VIPs, an online community of readers that acts as advisors to
Wood & Wood Products, found that 57% predict sales will be higher in 2011 compared to
2010. How will they accomplish this? An estimated 16% will buy new equipment, 13%
will raise prices, 8% will make changes to their product lines and 15% will do nothing new.

Office Industry Trending Upward
Calendar year 2010 turned out much better than expected for the office furniture industry, reports Tom Reardon, executive director of the Business & Institutional Furniture Manufacturers Assn. Early estimates by BIFMA have furniture orders up approximately 12 percent and shipments up about 5 percent over 2009.

Forecasts for 2011 also appear to be strong, Reardon says, with the latest projections of 8 percent growth in shipments this year. “Despite the slow economic rate of recovery, there are bright spots on the economic horizon. Many companies are flush with cash and in a position to reinvest in capital expenditures that could include furniture. The office vacancy rate is keeping lease rates relatively low and competitive and could prompt business relocations, which in turn could result in furniture orders,” he says.

“Capitalizing on available opportunities and continuing to manage their companies effectively should allow the industry to realize above average growth — and ideally, profitability — over the next year.”

With regards to exports and imports, currently, about half of all U.S. furniture exports go to Canada, which continues to be the chief office furniture trading partner with the United States. Canada and China are about equal as far as imports into the United States, both at 40 percent. (Read more comments from Tom Reardon on the state of the contract furniture industry.)

Retail Environments Look Strong
Strong holiday sales at the end of 2010 could act as an accelerant for business in 2011, says the Association of Retail Environments (A.R.E.).

“A.R.E. research indicates that sales of retail environments products increased by 9.5 percent and 2010 and we project an additional 10 percent increase in 2011,” says Klein Merriman, executive director. “At first glance, industry growth of close to 10 percent for two consecutive years sounds upbeat. But this is until you realize that the industry has declined so dramatically that it has a long way to go to get back to even.”

According to Merriman, two-thirds of respondents to A.R.E.’s Industry Forecast survey back in September predicted “it will be 2012 or later before they are back to 2007 sales levels. So the outlook for 2011 is continued growth — even if at a pace slower than most would prefer.”

Even a slow recovery is welcome news. And despite an increase in imported fixtures, displays and visual products from China the past few years, “pent-up demand for new and renovated stores should translate into sales gains going forward,” Merriman says.

“The competitive environment has changed and retailer expectations have changed,” says Bob Reiley, A.R.E. president and CEO/president of DSA Phototech. “Successful suppliers in 2011 will need to offer cost-effective, creative solutions to their clients and be prepared to offer technology integration to the products they provide. With the emphasis on remodeling existing stores, instead of building new stores, suppliers and designers will be focusing on providing the most visual impact within the budget allowed.” (Read more comments from Klein Merriman on the state of the retail environments/store fixture industry.)

Architectural Woodworking Industry at Status Quo
Growth in the architectural woodworking industry is expected to remain "neutral" in comparison to 2010, says Robert Stout, president of the Architectural Woodwork Institute and also president of RLS Commercial Interiors.

"For the most part, members' sales volume is down slightly from 2009; a few AWI member companies were having record years in 2009-2010, though most are not and still struggling. We speculate that business in 2011 will remain neutral in comparison to 2010. However, it was encouraging to learn on Dec. 22, 2010, that the AIA announced the Architectural Billings Index rose to 52 in November 2010, up from 48.7 the month prior and 50.4 in September 2010. Any score above 50 indicates an increase in architectural billing activity. Typically, architectural woodwork production lags 18 to 24 months behind the new construction curve," Stout says.

Challenges, he says, will include ways in which to find new work, combined with a slow cash flow. New opportunities though for the industry  include identifying new niche markets and ways in which to leverage quality service and offer added value to customers.

"There is no one word that describes what success might be in 2011," Stout says. "However, success might come to those companies who have the financial wherewithal to weather the down economy. Success might come by generating a more profitable volume of work through lower costs, and could also be shaped by management who thinks and acts outside the norm to explore new business opportunities in different markets and regions. Long and short, managers who focus on production, people and profits will certainly have a leg up on their competition as part of an overall strategy." (Read more comments from Robert Stout on the state of the architectural woodwork industry.)

Component Sales See Growth
Members of both the Wood Component Manufacturers Assn. (WCMA) and the Wood Products Manufacturers Assn. (WPMA) also see sales growth in 2011.

“Growth for 2010 was between 5 to 7 percent,” says Steve Lawser, executive director of the WCMA. “According to our newest market study, our members are expecting 2011 to show improvement in sales of around 10 percent.”

With the cabinet industry continuing to be the largest end-use market for components, Lawser notes, “recovery of the housing and remodeling markets will be key for our members. These two market segments are the largest customers for wood components.”

Members of the WPMA are also projecting an increase in 2011. “The majority of members have stated that sales for 2010 were at, or above 2009 levels, and most felt positive about business going forward,” says Phil Bibeau, executive director of the WPMA. “The overall consensus was that business has bottomed out and there will be a very slow and gradual increase in business in 2011, especially in the second half of the year.”

There are a number of challenges facing the components industry this year, Bibeau says. “The biggest challenges are the difficulties in generating new and profitable business and increasing business from existing customers.”

Lawser adds component manufacturers will need to “capitalize on their ability to produce smaller, more customized orders with quicker turnaround, find more ways to add value to their products and services, and respond quickly to customer requests.” (Read more comments from Steve Lawser on the state of the wood components industry.)

Bibeau agrees. “The biggest opportunities that members will see in 2011 will be for niche products that can be delivered in small quantities with extremely short lead times.” he adds. (Read more comments from Phil Bibeau on the state of the wood components industry.)

Panel Products Pick Up
Like those in the secondary wood products markets, producers of particleboard, MDF and hardwood plywood veneered panels say they have reached a turning point and see improvement in 2011.

“The dramatic drop in North American composite panel shipments in 2008-09 finally leveled off last year and overall shipments of particleboard, MDF and hardboard products were nominally up despite a disappointing second half of the year,” says Tom Julia, president of the Composite Panel Assn. (CPA). “CPA expects a continuation of this trend in 2011, with very modest overall improvement,” he adds.

The same is true for the hardwood plywood industry. “Sales recovered slowly in the first part of the year, but fell back to 2009 levels in the last part of the year, reflecting the very slow pace of the economy,” says Kip Howlett, president of the Hardwood Plywood Veneer Assn. (HPVA). “Exports, particularly for veneer, picked up with some markets showing higher percentage increases, although these tended to be smaller markets.”

Although the economy continues to have the greatest impact on sales, the growing popularity for green products will also continue to play a role, both groups report, particularly with regards to offering panels that meet or exceed formaldehyde emissions limits under California Air Resources Board (CARB) Phase 2.

Also of concern in 2011 is the availability of raw materials. “Our industry’s biggest challenge will continue to be focused around the raw material used to make composite panels,” Julia says. “Whether referred to as a fiber issue, a biomass issue or something else, it is really a constellation of public policy, energy, jobs and environmental issues...We will continue to fight for domestic jobs and rural manufacturing and support a level playing field when it comes to federal and state regulatory, tax and trade policies. This includes making sure the composite panel industry has free market access to the raw materials needed to make our products.” (Read more comments from Tom Julia on the state of the composite panel industry.)

Adds Howlett, “Cheap imports, particularly engineered hardwood products, flooring and plywood, are also having a significant impact. If cheap imports don’t flood into the domestic market and take the growth share, the domestic industry should do all right. Latin America and the Middle East will be more robust export markets for our engineered products and hardwood veneer. Asian markets for North American hardwood veneers are a mixed bag of expanding economies for growth potential, but tempered with trade barriers and open access to American hardwood logs for value-added processing there.” (Read more comments from Kip Howlett on the state of the hardwood plywood industry.)

Machine Purchases on Upswing
Machinery manufacturers are taking heart by the optimism of those in the secondary woodworking markets. Despite a relatively flat 2010, members in both the Wood Machinery Manufacturers of America (WMMA) and the Woodworking Machinery Industry Assn. (WMIA) are anticipating improved sales in 2011.

“The economic environment is much more promising for 2011. Members are projecting an increase of 8 to 10 percent in the woodworking industries, and a slightly higher increase in non-woodworking industries,” says Dave Rothwell, WMIA president and executive vice president at Stiles Machinery.

The challenge will be in finding new customers outside of traditional markets and increasing the speed of product delivery to customers, say Harold Zassenhaus and Jim Beach, executive directors of the WMMA. “Opportunities arise from the hopefully rising economy in 2011 and 2012. Where there is change, there is opportunity. Working closely with their customers to understand and satisfy the end users’ needs will provide the greatest opportunity,” Zassenhaus says. (Read more comments from Harold Zassenhaus and Jim Beach on the state of the woodworking machinery industry.)

“America is a wonderful pace to manufacture and certain woodworking manufacturers are eliminating their import lines and bringing the manufacturing back to America due to the increases in manufacturing costs abroad as well as logistics costs, obsolescence, inventory carrying costs, etc.,” says Rothwell.

“Relatively speaking,” he adds, “land in America is inexpensive, the population is growing, raw materials are abundant, a good labor force exists, and first and foremost, America is the number one consumer market in the world.” (Read more comments from Dave Rothwell on the state of the woodworking machinery industry.)

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