US Office Furniture Manufacturing Industry Bounces Back from RecessionAvaya
Low business sentiment and high unemployment have affected the U.S. Office Furniture Manufacturing industry, which includes call center furniture, during the recession. As a result, demand for office furniture remained low. Still, industry research firm IBISWorld has released a report showing that demand will revive over the next five years, in line with the improved job market, spurring growth for office furniture manufacturers.
In the last five years, the Office Furniture Manufacturing industry has suffered through tough economic conditions. Weak corporate profit and high unemployment following the recession reduced demand for new office furniture. Meanwhile, rising import penetration from China, which can produce comparable goods at a much lower cost, has also contributed to the decreased industry revenue.
Consequently, industry revenue is expected to decline at an average annual rate of 6.5 percent over the five years to 2012, according to IBISWorld industry analyst Sean Windle. But, demand conditions are improving as the U.S. economy recovers from the recession and businesses expand their operations. In 2012 as the number of businesses increases and companies hire more employees, industry revenue is said to rise 3.6 percent to $20.6 billion.
The report said that volatile input prices have adversely affected the industry. From 2007 to 2012, the price of steel has risen at an average annual rate of 3.6 percent, with increases of 16.0 percent and 12.7 percent in 2010 and 2011. The price increase in 2010 was coming off the back of a 25.1 percent price drop in 2009, while the price of steel is expected to rise just 1.2 percent in 2012. These price fluctuations have created a challenge for manufacturers to anticipate future spending, according o Windle, so profit margins have decreased.
In the past five years, industry concentration has increased because a lot of office furniture manufacturers have gone out of business. High unemployment rates and low business sentiment after the downturn of the US economy have created a competitive environment for existing players. Faced with eroding profit margins and volatile input costs, underperforming companies left the market.
Despite recent declines, the industry is expected to return to growth over the next five years but some mitigating factors will remain. Higher import penetration will likely constrict growth, lowering domestic demand and increasing price pressures on domestic manufacturers. Also, raw material prices are projected to continue increasing and will adversely affect profitability over the period.
As economic conditions improve, businesses and office-based jobs are projected to rise through 2017, further driving the Office Furniture Manufacturing industry demand and revenue growth.
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Edited by Allison Boccamazzo