April 2016 MADA / OFI Trends Survey: Furniture Industry Index Is Unchanged; Nearly Two Years of Steady Growth
Michael A. Dunlap & Associates, LLC unveils the results of its quarterly MADA / OFI Trends Survey, a unique tool that measures the current business activity of the commercial furniture industry and its suppliers. This survey was completed during the month of April 2016 and marks the 47th Edition. The Survey was started during the summer of 2004.
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 unique element of this survey is the establishment of an Industry Index Number to quantify where the industry is currently performing. For example, an index of 100 means that things “couldn’t be better”, an index of ONE is “absolutely the worst” it can be, and an index of 50 means it is neutral; no change “up” or “down”.
The April Overall Survey Index is (57.24) compared to an almost identical January 2016 Overall Index of (57.25) and exceeding October 2015’s (56.05). The 47 Survey average for the overall index is 54.79. The highest recorded Index was 59.72 in July 2005 and the lowest was 41.45 in April 2009 during the bottom of the recession.
“The industry continues to grow steadily. Obviously the smaller to mid-sized companies are growing faster than the Top Five. The Overall Index is strong and is definitely above the 54.79 Survey average. 2015 was the best year we had seen in well over a decade and we remain confident that 2016 will be even better!” Mike Dunlap commented.
The January 2016 survey highlights are:
>Gross Shipments Index retreated to 57.35 after an all-time record of 64.33 in January and 59.33 in October 2015. The 47 Survey Average is 57.92. The Order Backlog Index of 58.06 slipped from 59.00 in January, but was higher than the 57.00 Index in October. The 47 Survey Average is 56.90.
>The Employment Index also retreated to 54.24 from 57.00 in January and 55.33 in October. The 47 Survey Average is 52.38. The Hours Worked Index of 58.28 rose slightly from 57.50 in January and compares to 58.52 in October. The 47 Survey Average is 55.61.
>The Capital Expenditures rose significantly to 61.25 from 55.33 in January and 55.17 in October. Tooling Expenditures dipped to 57.19 from 57.93 in January, below October’s 58.52. These compare to the 47 Survey Averages of 55.60 and 55.98.
>New Product Development rebounded to 63.03 from 61.33 in January and 57.93 in October. The 47 Survey Average is 63.52.
>Raw Material Costs 53.33 improved again and marks the highest and all-time best index for this category. The January index was 52.33. Four of the past five quarters are all above 50.00 and the 47 Survey Average is 45.03.
>Employee Costs also improved to 47.81 from January’s 46.55 and October’s 44.00. The 47 Survey Average is 46.71.
>The Personal Outlook Index is 61.82, up from 61.03 in January, but down from October’s 64.67, The all-time high was 66.40 in July 2016. The 47 Survey average is 57.99.
Dunlap further stated “The fact that we have an all-time high index value for raw materials in the April 2016 survey is very exciting! The high Gross Sales, Employment, and Capital Expenditures are indicators of the current strength of the industry.The shifts in Employment Levels and Hours Worked index values are indicative signs that hiring new employees might be keeping up with demand and is still not being offset by less overtime.
“The increase in Capital Expenditures and steady Tooling Expenditures are mixed when comparing them to their 47 survey averages, The New Product Development index is still somewhat alarming and we will monitor this puzzling trend closely. Both manufacturers and suppliers continue to report similar experiences.
“The improved Raw Material Cost Index has become the norm, because it reflects the decline in the prices of commodities like fuel, steel, copper, and plastics. It’s actually a “deflation” scenario that is typically good only for a short period. Yes, it beats index values in the upper 30’s and lower 40’s. With the five quarter average at 50.95 and 47 quarter average of 45.03, conditions remain out of balance.
The Employee Cost index value is not unusual and is slightly better than the 47 survey average.
Dunlap added, “Although there are signs of softening, I am delighted 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 healthcare costs and exchange rates. Healthcare costs are the most commonly cited concern from respondents since this survey process was started in August 2004.
As always, Dunlap thanked the respondents with this comment. “Almost 75% of the responses come from executives who are the Chairman, CEO, COO or President of their organizations. I am always extremely grateful for their participation and support. Their suggestions and recommendations are extremely helpful to the performance and content of this unique survey.”
“Six out of ten Index values have improved and four have declined, but these are simple corrections in the industry’s performance. Only Employee costs are below the ‘50’ level. We maintain the opinion that the industry will continue to grow steadily during mid 2016 and probably into 2017.”
The April 2016 MADA / OFI Trends survey was sent to more than 800 individuals involved with office furniture 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 $10 Million in sales. The survey repeats in July 2016.
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Michael A. Dunlap & Associates, LLC, is a consulting firm that focuses upon issues involving the working, learning, healing, and hospitality environments and furniture industries.
These include strategic business and market planning, furniture industry trends, Market Entry, Global Partnerships, & Collaboration, Author, Presenter, & Speaker, Mergers, Acquisitions, & License Agreements, Expert Witness Services in Products Liability, and Independent Rep Sales Team Development