HOLLAND, Mich. - Office and contract furniture manufacturers reported slightly higher shipments and business activity for July, according to Michael A. Dunlap & Associates in its quarterly MADI/OFI Trends Survey report.  The survey measures the current business activity of the commercial (office, education, healthcare, and hospitality) furniture industry and its suppliers.

July's survey shows an overall index in July of 58.90, with nine out of ten index values showing improvement from the previous quarter of 54.58 in April; January results were at 59.31. The highest recorded Index of 59.72 was in July 2005. The lowest was 41.45 in April 2009 during the bottom of the recession.

July's gross shipment index was at 74.00, 16 points higher than April's index of 57.73, and 9.60 points higher than recorded in January. "It is important to recognize this reflects the rate of change over the first quarter, which was unusually low below the 58.49 survey average and the previous six months. This may reflect a distorted image of the actual situation." 

The previous all-time high and low were in July 2018 (66.86) and July 2009 (41.40).

The July order backlog index was the highest recorded index in the category, the survey reported, jumping 16 points to 74.50 over the first quarter. The April index was at 55.00 and January was at 67.92. "January 2019 was previously the highest we have experienced since the survey began in 2004," Dunlap said. "It was well above the 58 survey average and was remarkably very strong. Like its sister Gross Shipments Index, the quarter-over-quarter increase is significant, but may distort the actual image.

"We will continue to watch these two index values very closely during the third and fourth quarters of 2019."

July's employment index improved 2 points, to 57.00, and the hours worked for the quarter also rose, reaching 61.67 in July compared to 56.11 in April. "The July 2019 Hours Worked Index is the highest we have experienced since July 2017," Dunlap noted.  "We view 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 remains the norm, not the exception."

Along with healthcare costs, increased worker hours, including overtime pay, also led to an increase in the Employee Costs Index for the quarter.

The Capital Expenditures Index remained steady, with the July survey recording 54.74 compared to 54.29 in April. Historically the index has been in the mid to upper 50s, so the last two numbers are slightly below average, the survey noted. The Tooling Expenditures Index was also below average the last two quarters, at 52.78 for the July Index, and 52.50 for April, compared to 57.50 for the January 2019 Index. The all-time high was recorded in the April 2017 Index, at 66.65.

July's New Product Development Index rebounded by 1.5 points, the survey said, at 61.05 compared to 59.55 for the April Index, although both are below the Survey Average Index of 63.26.

Recent tariffs may have impacted raw materials costs, although they remained fairly stable and near the survey average of 44.87. The Raw Material Costs Index for the July survey was 44.44, compared to 45.91 in the April 2019 Index, and 47.40 seen in the January 2019 Index. "The current index indicates that material costs have steadied and are near the 58 Survey average," Dunlap said.

Along with tariffs, the most frequently cited perceived threats to the industry’s success continue to be travel, transportation and logistics costs. Healthcare costs have been the most commonly cited concern from respondents since the survey began in August 2004.

While noting “We feel good about where the industry is currently," Dunlap added, "The effects of the next round of tariffs are still too early to predict, but it is reasonable to believe that it will dampen third and fourth quarter numbers. The overall economic growth will likely affect this industry.

“In spite of the first quarter declines, we believe that the industry remains very strong."

The July 2019 MADA / OFI Trends survey was sent to more than 525 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 October 2019. Michael A. Dunlap & Associates LLC, is a consulting firm that focuses upon issues involving the working, learning, healing, and hospitality environments and furniture industries.

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