Wood Furniture Trade Deficit on Record Pace

Association Reports:
AFMA HMA NALFA WMIA
AWFS HPVA NASFM WMMA
AWI IHPA NHLA WMMPA
BIFMA KCMA WCMA WPMA
CPA LMA WDMA  

Recession? What Recession?

Woodworking industry feeling good about about 1999

BY BARRETT KILMER

 

Fed's Rate Cuts of Great Interest to Woodworking Industry

In an effort to prevent the U.S. economy from slipping into a recession next year, the Federal Reserve Board has cut interest rates three times in recent months.

Representatives from the woodworking industry were very much in favor of the rate cuts, which total three-quarters of a percent. Following are some examples of what W&WP heard.

â?¢ "Mr. Greenspan is without question, an absolute genius of manipulation of interest rates. He must have a crystal ball to know exactly when to push the 'drop button' and we honestly feel that another reduction will be given, probably during February 1999." -- Albert Bibeau, WPMA executive director

â?¢ "Lower interest rates are always good. This move does not have a strong impact on our membership as it does for some associations, although it does help the overall health of retail." -- Klein Merriman, NASFM executive vice president

â?¢"We love him. 'Greenspan for President.' The lower the prime rate goes, the more comfortable retailers become in making investments in their business. Retailers are far less concerned about inventory building a little as opposed to when we have double-digit inflation." -- Doug Brackett, AFMA executive vice president

â?¢ "Anything at all that helps stimulate the economy and maintain construction at anywhere near the current pace is obviously going to help the industry and the association." -- Alan Campbell, WDMA executive director

â?¢ "Any action by the Fed to lower the cost, or increase the availability, of obtaining credit is welcome." -- E.T. "Bill" Altmen, HPVA president

â?¢ "Since most of our members are privately held companies, they have to borrow to finance new machinery and equipment and other improvements in their business. Lower interest rates will help lower their cost of doing business." -- Steve Lawser, WCMA executive director

â?¢ "It should improve already good housing starts." -- Stan Blaine, WMMPA marketing coordinator

â?¢ "If it translates into more new housing, then the impact would clearly be beneficial for the flooring market." -- Bill Dearing, NALFA president

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?

The optimism of these association representatives runs contrary to the discouraging predictions of the National Association of Home Builders. NAHB forecasts housing starts, which grew by 7.7% to 1.6 million units in 1998, to drop by 7.8% to 1.47 million units in 1999.

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

When woodworkers did express concern, they often focused on the Asian economic crisis and its effects on the import and export markets.

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

The chief focus of the association representatives, however, was on issues closer to home. In addition to forecasting the economy, they weighed in on the November mid-term elections, the outcome of which did not seem to cause much concern.

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.

 

It's the Economy, Stupid

The recently held mid-term elections brought disappointment for Newt Gingrich and fellow Republicans, but most of the woodworking industry officials W&WP spoke with were more concerned with the economy.

"Once again the elections seem to indicate that voters react to economic conditions. As long as economic conditions are good, there's no need to change things very much," said AWI president Philip Duvic.

"I think the impact of the election results on our industry and association is debatable," said Klein Merriman, executive vice president of the NASFM, who had his mind on more pressing matters. "The real important event for us is the Christmas and holiday shopping season. We watch that very closely."

Those who did express some reservations about the outcome pointed to environmental issues as an area of concern. Stan Blaine, marketing coordinator for the WMMPA said his association's membership is "concerned that more environmental over-reaction will be supported by the new electees."

Others felt that the status quo was beneficial and that bipartisan cooperation was more important than the breakdown of Democrats and Republicans.

"We think the current balance of power between the Republican and Democratic parties is helpful to our economy and industry," said Steve Lawser, executive director of the WCMA .

"We welcome the opportunity to work with members of Congress -- of any political party -- who support responsible management of our natural resources and common-sense trade and regulatory prices," said E.T. "Bill" Altmen, HPVA president. "A spirit of bi-partisanship, if that is the result of the election, would be welcome on many of the issues we support."

"We expect more cooperation between the parties -- that hopefully will result in fewer stalemates and more being accomplished," said Tom Reardon, executive director of BIFMA.

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