|Title:||United States wood components markets in percentages for 1984, 2006, and 2011|
|Source:||Wood & Wood Products|
Start of full article - but without data
Changing wood component markets
1984 2006 2011
Cabinetry XX% XX% XX%
Building Products XX% XX% XX%
Furniture XX% XX% XX%
Industrial Products X% X% X%
Decorative/specialty X% X% X%
Source: WCMA Market Studies
Sales for 2012 are expected to match or beat 2011 figures. That is the consensus of a majority of representatives from the major woodworking markets.
That optimism is backed by recent projections by the National Association of Home Builders (NAHB) and other groups for gains in new housing activity and remodeling projects for 2012. NAHB is forecasting that new home sales will rise XX percent in 2012.
In a recent statement, NAHB Chief Economist David Crowe noted, "The three-month moving average for new-home sales and numerous other indicators--such as builder confidence, new building activity and the razor-thin inventory of new homes for sale - show that the market is basically holding its own, and no longer moving backwards. However, many of the same challenges that builders have cited in the past continue to pose obstacles to the market's advancement, including buyers' inability to sell an existing home, consumer concerns about job security, and tight credit conditions for both building and buying new homes,"
Crowe added, "The residential remodeling market has been improving gradually, mirroring the trend in other segments of the housing market. Stringent lending requirements and economic uncertainty continue to be a drag on demand, but we expect a modest growth in remodeling activity to continue throughout 2012."
Cabinet Sales Hold Steady
Cabinet sales for 2012 look to be flat, with projections holding at $X billion, the same as 2011, said Dick Titus, executive vice president of the Kitchen Cabinet Manufacturers Assn. Titus said the KCMA's projection is based on an analysis of virtually all current cabinet market studies correlated with the association's monthly trend of business reports, in which XX-XX companies--accounting for XX to XX percent of the cabinet market--regularly participate.
"Cabinet manufacturers are firmly caught in the grip of the current stagnant U.S. economy, lost consumer confidence, overall unemployment and job concerns, borrowing difficulties, falling house values, and the reduced priority in Washington of housing as a policy priority and economic/employment driver for the U.S.," Titus said.
Prior to November 2006, the cabinet industry recorded XXX consecutive months of growth, Titus said. "Since then, results have been mostly negative with the market falling from a high of $XX billion to its current $X billion level."
While he acknowledges that 2012 will not bring about a big turnaround, he added that the industry will see some improvement in the second half of the year. "Currently, the industry has posted positive four consecutive months of" growth (Aug-Nov) according to the KCMA monthly trend of business.
"This is encouraging, but year-to-date still remains negative at -X.X percent. Competition is very keen and growth generally is at the expense of someone else's market share," Titus said.
Retail Environments Continue to Rebound
Research by the Association for Retail Environments (A.R.E.) has business continuing to show improvement for the third straight year. Following an estimated XX percent growth in 2011, projections call for an additional XX percent growth in 2012, although not all industry segments will achieve that same level, said Klein Merriman, executive director.
"The recovery is different for luxury retailers versus mid-market stores, and it's very different for new store construction versus remodel activity. But all evidence indicates that the uneven recovery in capital expenditures taking hold in the retail environments industry will continue for a third year in a row in 2012," he said. Tempering the growth projection, Merriman said, is the fact that there are fewer companies producing products for retail environments than there were in 2007.
However, that also means more sales opportunities for the North American producers of fixtures, displays mannequins and other products, including projects on other continents. According to A.R.E. member research conducted last summer, XX percent of the companies said XX percent or more of their sales are from international projects. In a different survey, Merriman reported, XX percent of retailers reported that they preferred to work with North American vendors in sourcing fixtures, displays, products, and other services for international locations. "This is a logical extension of the trend of North American-based retail design firms doing more and more of their work for international projects," he said.
"There are definite bright spots in this otherwise modest recovery. New retailers and brands morphing into retailers enter the market almost non-stop. And many luxury brands and retailers are continuing to invest heavily in both new locations and remodels. This expansion by luxury retailers explains the anecdotal evidence we've seen that vendors in this segment, including higher-end architectural millwork firms, have fared better than average in the past two years.
"And, at the other end of the spectrum, it's been a good couple of years for firms providing fixtures for the rapidly expanding dollar stores. 'Recover' is really about healing, and more healing is the prescription for the retail environments industry in 2012. In general, retailers appear to have adequate cash on their balance sheets to fund both ongoing renovations and increased new store openings in 2012. And to date, the consumer appears to be cooperating with increased spending, which bodes well for the future."
Architectural Woodworking Staying Steady
Overall, sales expectations for the architectural woodworking industry look to "mimic" 2011, with some sectors performing better than others.
"I have heard from very few companies that expect their sales to increase in 2012," said Matt Lundahl, Meyer and Lundahl Manufacturing Co. and president of the Architectural Woodwork Institute. "Most are still cutting back to be more competitive and budgeting for similar sales figures as 2011"
There also is concern that as TARP (Troubled Asset Relief Program) projects come to an end, that will put a strain on the number of jobs in the private sector, Lundahl added.
As with many wood products companies, cash flow management is putting a burden on architectural woodworkers. "Getting paid enough and timely appears to be the biggest stumbling block for our industry right now," Lundahl said, "With the difficulties in getting banks to loan money and the reluctance to restructuring debt, architectural woodwork manufactures are mostly cash poor and need to very carefully manage their cash and cash flow."
Along with cash flow management, the industry also will need to "get creative to find new profitable work in places and markets out of your norm. Partnering with others at what they do best to be competitive is also the new norm in this market," he added.
Another "norm" for the market is sustainable/green certified products, "especially out here in the west and especially California," Lundahl added. "This should be viewed as a positive and getting in on it can give firms a competitive advantage."
Modest Growth in 2012 for Home Furniture
Building on the modest growth seen in 2011, industry analysts are predicting X.X percent growth for residential furnishings for 2012, based in part on slight gains in employment and modestly improved higher home sales, said Andy Counts, CEO of the American Home Furnishings Alliance.
"The biggest challenge facing the industry continues to be the economy," Counts said. "Although consumer confidence has improved and a double dip recession appears to have been avoided, we are in an election year and that tends to bring many negative factors. On the bright side, 2012 is projected to bring a rebound in housing starts, a decline in foreclosures and attractive mortgage levels. Combined with lower home prices, this creates an excellent opportunity for residential housing turnover. This is an important factor for residential furniture sales."
Although the demand for sustainable/green certified products has not yet hit the residential furnishings market to the extent of office furniture, Counts said he does foresee this changing over time. Many companies are positioning themselves for an increased demand in this segment. Those companies are finding that the environmental improvements are also providing cost savings in many areas.'X
Also affecting the residential furniture market are regulations including CARB and the boiler MACT "We are heavily involved with several key issues at both the state and federal level," Counts said. "In addition to the continuing developments surrounding the use of wood fuel in boilers we will be very active with the EPA as they finalize the formaldehyde regulations. Efforts at EPA may cause California to modify their standard in an effort to stay in front of this issue. The need for a level playing field nationally on this issue will be a primary focus for AHFA in 2012."
Slight Dip for Office Industry
According to Tom Reardon, executive director of the Business & Institutional Furniture Manufacturers Assn., 2012 shipments from U.S. based manufacturers are projected to reach $X.X billion to $X.X billion, down slightly from anticipated 2011 figures of $X.X billion in sales.
For 2012, he said, "The biggest challenge will probably continue to be the slowly recovering economy and the low rate of employment growth that we're experiencing. The fact that this year is an election year may make some segments of the economy cautious about committing to expansion until the path ahead is somewhat clearer. Not that the path forward is ever clearly defined.
"Many furniture manufacturers find opportunities by diversifying into other vertical market segments such as education, healthcare and hospitality, and I expect that trend will continue. From an association standpoint, I see many opportunities for collaboration in areas that can provide efficiencies for the entire industry, such as developing standards for healthcare furniture, and developing tools to more consistently define sustainability," Reardon said.