Monday, February 17, 2014: As the number of US businesses increases, industry revenue is forecast to rise; however, some mitigating factors will remain. For these reasons, industry research firm IBISWorld has updated a report on the Office Furniture Manufacturing Industry industry in its growing industry report collection.
During the recession, the Office Furniture Manufacturing industry suffered as businesses cut back on expenses, hindering demand for new office furniture. Moreover, companies within the industry were forced to lower prices to remain competitive, hampering industry profit. Nevertheless, these trends reversed in 2011 as corporate profit improved. “When corporate profit expands, businesses are more likely to invest in new furniture, thereby bolstering demand for industry products,” according to IBISWorld Industry Analyst Brandon Ruiz. Additionally, industry revenue has been trending higher, fueled by US enterprise growth. Generally, the more businesses there are, the more office furniture is needed. To this end, IBISWorld expects industry revenue to grow at an annualized rate of 2.0% to $23.3 billion over the five years to 2014, lifted by an estimated 0.4% increase in 2014.
Despite positive growth prospects following the recession, the rising prominence of low-cost imports continues to adversely affect the industry. Countries such as China have lower labor and overhead costs, allowing them to offer lower prices on comparable products, which effectively eroded domestic demand for US-made products. Volatile input prices have also adversely affected the industry. The price of steel, a major input for office furniture, plummeted 25.1% in 2009 and jumped 16.0% in the following year. “These price fluctuations made it difficult for manufacturers to anticipate future spending and control costs,” says Ruiz. Consequently, many firms were forced to reduce the number of establishments. However, as demand continues to rebound, industry operators are expected to slowly expand production capacity. To this end, the number of establishments is expected to slightly rise, growing at an annualized rate of 0.1% over the five years to 2014.
As the number of US businesses increases, industry revenue is forecast to rise; however, some mitigating factors will remain. Higher import penetration will lower domestic demand and increase price pressures on domestic manufacturers, slightly constricting growth. Also, raw material prices are projected to continue increasing, which will adversely affect profit in the same period. Manufacturers can pass the additional costs on to buyers, but in doing so, they risk losing business to low-priced foreign imports.
