HOLLAND, Mich. – The October contract furniture survey remained solid, despite several challenges.
Michael A. Dunlap & Associates released the results of its October 2018 Quarterly MADA / OFI Trends Survey, a tool that measures the current business activity of the commercial (office, education, healthcare, and hospitality) furniture industry and its suppliers. This survey was completed during the month of October 2018.
"During the second quarter, the slowdown with some of the large public companies indicated a general decline in the industry performance. At MADA, we disagreed and we continue to be bullish,” Dunlap said.
“We are surveying many more than five or six companies. The growth is coming from the smaller (companies) under $50 million in 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.
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.
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 October 2018 survey highlights are: Gross Shipments Index: 60.37 for October 2018 Index (on a scale of 1 to 100) 58.13 for the 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, Dunlap said. (The July 2018 Order Backlog Index of 66.57 was an all-time high).
Dunlap sees this as a positive indicator for industry sales for the 4th Quarter of 2018 and into the 1st Quarter of 2019.
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.
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.
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.
Raw Material Costs Index, 37.69 for the October 2018 Index, compared to 44.81 for the 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, Dunlap said
In 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 be very dismissive of a very good quarter. Ten different elements affect this index.
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. “(The year) 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.
For further information, contact: Mike Dunlap at 616-786-3524, e-mail: [email protected];
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