MADA / OFI Trends Survey for July 2018
July Furniture Survey Remains Strong
Michael A. Dunlap & Associates, LLC unveils the results of its July 2018 Quarterly MADA / OFI Trends Survey, a unique tool that measures the current business activity of the commercial (office, education, healthcare, & hospitality) furniture industry and its suppliers. This survey was completed during the month of July 2018 and marks the 54th Edition. The Survey began in 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 July 2018 survey highlights are:
Gross Shipments Index:
66.86 = July 2018 Index
58.09 = 54 Survey Average Index
The July 2018 index of 66.86 is an all-time high and is significantly above the 54 survey average. The previous all-time high and low were October 2014 65.85 and July 2009 41.40.
Order Backlog Index:
66.57 = July 2018 Index
57.57 = 54 Survey Average Index
The July 2018 Order Backlog Index of 66.57 is also an all-time high and well above the 54 survey average and is remarkably very strong. We still see this as a positive indicator for industry sales for the 3rd and 4th Quarters of 2018 and into the 1st Quarter of 2019.
Employment Index:
55.14 = July 2018 Index
52.53 = 54 Survey Average Index
The Employment Index measures the degree of increase or decrease in employment levels. The July 2018 Index 55.14 is well above the 54 survey average. In West Michigan and many other industry locations, labor shortages are driving up wages but increased hiring remains strong.
Hours Worked Index:
57.50 = July 2018 Index
55.81 = 54 Survey Average Index
The Hours Worked Index is closely tied to the Employment Index. When the Hours Worked Index increases into the mid 50’s (usually due to overtime), the following 1-2 quarters often see increases or decreases in the Employment Index. This is an anomaly that both are up significantly. The inability to fill both entry level and skilled positions are driving up hiring and hours worked. Overtime is now the norm, not the exception.
Capital Expenditures Index:
54.12 = July 2018 Index
55.93 = 54 Survey Average Index
Historically, the Capital Expenditures Index has steadily been in the mid to upper 50’s. The July Index of 54.12 is within recent ranges, but slightly lower than average. The all-time high was 64.74 in April 2017.
Tooling Expenditures Index:
61.76 = July 2018 Index
56.58 = 54 Survey Average Index
The Tooling Expenditures Index tends to remain very steady from quarter to quarter and typically tracks along with Capital Expenditures, but the significant increase during the 2nd Quarter and it is well above the 50 survey average. It is notable that the April 2017 Index of 66.65 was the previous all-time high.
New Product Development Index:
66.47= July 2018 Index
58.58 = 54 Survey Average Index
The July 2018 Index of 66.47 is the highest we have experienced since the April 2015 Index of 69.70, This is very good news!
Raw Material Costs Index:
38.44 = July 2018 Index
44.94 = 54 Survey Average Index
Many commodity prices in the 2nd Quarter of 2018 have increased significantly. Through 2015 and into 2016, the average was (50.95). The current index indicates that material costs are increasing and will likely dampen profitability unless selling price increases can offset these additional costs.
Employee Costs Index:
45.88 = July 2018 Index
46.59 = 54 Survey Average Index
Much like its companion Raw Materials Index, the Employee Cost Index is rarely above 50.0. Healthcare costs are the most frequently identified issue that contributes to higher Employee Costs. The index also reflects the need to pay higher wages during near full employment.
The Personal Outlook Index:
64.32 = July 2018 Index
58.74 = 54 Survey Average Index
The strong index is good news at it has remained over “61” for the past 18 Quarters. This is remarkable and most certainly gives a boost to the Overall Index.
The Overall Index for the July 2018 Survey is 57.13, dampened by the Raw Materials Index. The 54 Survey Average Index is 54.98. 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.
Dunlap commented “The industry continues to grow but at a nice, steady pace. The Overall Index is strong and remains well above the 57.13 Survey average. We remain confident that 2018 will exceed 2017,”
“I feel good about where the industry is currently. 2018 will continue on the same path, but the current political uncertainties, mid-term elections, tariff and trade questions, and the resulting economic climates make predictions into 2019 very difficult.
Dunlap further stated, “Although some think the slowdown with some of the large public companies indicates a general decline in the industry performance, at MADA, we disagree, We are surveying many more than five or six companies. The growth is coming from the smaller under $50.0 Million 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.
As always, Dunlap thanked the respondents with this comment. “Over 58% of the responses come from “C” level 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 continue to be helpful to the performance and content of this unique survey.”
The July 2018 MADA / OFI Trends survey was sent to more than 540 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 2018.
For further information, please contact:
Mike Dunlap at
Phone: 616-786-3524
Mobile: 616-990-8725
e-mail: mike@mdunlap-associates.com
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 Commercial Furniture Industry Trends, Strategic Business and Market Entry & Planning, Global Partnerships, & Collaboration, Mergers, Acquisitions, & License Agreements, Expert Witness Services in Products Liability, and Author, Presenter & Speaker
