Low business sentiment and high unemployment adversely affected the industry during the recession. As a result, demand for office furniture remained low. In addition, because China is able to produce goods at a much lower cost, rising import penetration from the country has further hurt industry revenue. Nevertheless, demand will revive slowly over the next five years, in line with the improved job market, spurring growth for office furniture manufacturers. For these reasons, industry research firm IBISWorld has added a report on the Office Furniture Manufacturing industry to its growing industry report collection.
Los Angeles, CA (PRWEB) July 22, 2012
The Office Furniture Manufacturing industry has suffered through tough economic conditions during the five years to 2012. Weak corporate profit and high unemployment following the recession significantly reduced demand for new office furniture. Meanwhile, rising import penetration from China, which can produce comparable goods at a much lower cost, has further hurt industry revenue. Consequently, industry revenue is expected to decline at an average annual rate of 6.5% over the five years to 2012, says IBISWorld industry analyst Sean Windle. Fortunately, demand conditions are slowly improving as the US economy recovers from the recession and businesses expand operations. As the number of businesses increases and companies hire more employees, industry revenue is forecast to rise 3.6% to $20.6 billion in 2012.
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%, with increases of 16.0% and 12.7% in 2010 and 2011, respectively. While certainly high, the price increase in 2010 was coming off the back of a 25.1% price drop in 2009. In contrast, the price of steel is expected to rise only 1.2% in 2012. These price fluctuations have made it difficult for manufacturers to anticipate future spending and control costs, continues Windle. As a result, profit margins have decreased. In the face of diminished demand, high overhead costs and falling margins, many firms were forced to merge or exit the industry completely. During the five years to 2012, the number of manufacturers is estimated to decrease at an average annual rate of 1.1% to total 3,697 businesses. The Office Furniture Manufacturing industry has low market share concentration. IBISWorld estimates that the industry’s largest players Steelcase Inc., HNI Corporation and Herman Miller Inc. The remainder of the market is captured by a large number of small and privately owned businesses that successfully supply the local community's retail demand. In the five years to 2012, industry concentration has increased because many office furniture manufacturers have gone out of business. High unemployment rates and low business sentiment after the downturn of the US economy have created an intensely competitive environment for existing players. Faced with eroding profit margins and volatile input costs, many underperforming operators were forced to exit the market.
Despite recent declines, the industry is expected to return to growth over the next five years. However, 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. Manufacturers can pass the additional costs on to buyers, but in doing so they risk losing business to lower-cost foreign imports. Still, as economic conditions improve, the number of businesses and office-based jobs is projected to rise through 2017, further driving industry demand and revenue growth. For more information, visit IBISWorld’s Office Furniture Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
The Office Furniture Manufacturing industry produces a wide range of office furniture, including bookcases, cabinets, chairs, desks and filing cabinets. It also manufactures office and store fixtures, such as cafeteria countertops (except kitchen and bathroom), furniture parts and partitions. Furniture may be ordered predesigned or customized, and may be sold assembled or unassembled.
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About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.
Gavin Smith
IBISWorld
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Source: news.yahoo.com
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