Recession? What Recession?
Woodworking industry feeling good about about 1999
BY BARRETT KILMER
Citing Asia's economic woes and a recent slowdown in the U.S. economy, Sunday morning pundits have been warning anyone who will listen that a recession is just around the corner. Editors at Wood & Wood Products spoke with industry executives and heard quite a different story. Apparently, woodworkers have been too busy filling orders to watch Sunday morning television.
W&WP talked to representatives of 19 industry associations ranging from lumber producers and machine suppliers to furniture and cabinetmakers. We asked them about the state of the woodworking industry both this year and for next year.
While many expressed some uncertainty about the future, the vast majority said 1998 was a good year for business and that they were looking forward to another good year in 1999.
"The general feeling is that things will stay about the same as they are," said Stan Blaine, marketing coordinator for the Wood Moulding & Millwork Producers Assn.
Paul Houghland Jr., executive manager of the National Hardwood Lumber Assn., said, "The hardwood industry ties very closely to home-building and remodeling. Housing starts are very solid, and the furniture market has a very rosy outlook for 1999."
Housing Starts Headed South?
Since housing starts are the engine of the industry, it would seem logical that the executives we spoke with would be concerned about these numbers.
But recent reductions in the prime rate had woodworkers naysaying predictions of a housing slump.
"Lower interest rates have a big impact on our industry because our fate is tied to the housing market," said Riccardo Azzoni, president of the Woodworking Machinery Industry Assn. "If that stays strong, we all benefit." Azzoni also said better financing on machinery purchases would be beneficial.
Another factor supporting these optimistic views is the Gross Domestic Product, which analysts were expecting to grow at an anemic annual rate of 2.1% for the third quarter of 1998. Statistics released by the Bureau of Economic Analysis show the GDP rose at a surprisingly strong annual rate of 3.3%, suggesting next year's slowdown may not be as bad as some have expected.
Eyes on Asia's Economy
Albert Bibeau, executive director of the Wood Products Manufacturers Assn., said he thought low-cost imports were a problem for domestic woodworking companies. "Companies in the Pacific Rim and Far East are manufacturing products, many made with American lumber, and shipping these finished goods and semi-fabricated items into North America at greatly reduced prices," he said.
U.S. Department of Commerce trade data would seem to support the contention that Asian furniture manufacturers are putting an even greater emphasis on the U.S. market. Imports from nine Asian countries including China, Indonesia, Malaysia, Taiwan and Thailand were an estimated $2.017 billion for the first three quarters of 1998 compared to $1.694 billion for the same period in 1997, an increase of 19.1%. To add insult to injury, exports to those countries dropped from $118.262 million for that period in 1997 to an estimated 78.254 million in 1998, a 33.8% decrease.
The Home Front
Editor's note: W&WP would like to thank the associations that contributed to this issue along with Larry Adams, Rich Christianson, Sam Gazdziak, Jo-Ann Kaiser and Barrett Kilmer who compiled the information.
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