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BIFMA forecast expects deeper downturn

Thursday 29 May 2008

A slow national economy has the office furniture industry\'s projected two-year downturn worsening.

As the industry prepares for its massive annual trade show in two weeks in Chicago, NeoCon, an updated outlook from the Business and Institutional Furniture

Manufacturers Association forecasts a 6.8 percent decline in shipments this year, to $10.6 billion.

The outlook is a sizable downgrade from the 0.6 percent decline forecast in February for 2008.

The Grand Rapids-based BIFMA\'s outlook, prepared by Global Insight and updated quarterly, also forecasts a 6.3 percent shipment decline in 2009 to $10.0 billion, more than twice the decrease than previously predicted.

The downgraded outlook reflects deteriorating economic indicators that impact the industry: New office construction, corporate profits and capital spending, and white-collar job growth, BIFMA Executive Director Tom Reardon said.

\"It\'s just a further erosion in all the drivers,\" Reardon said. \"Since the last forecast, everything looks a little bleaker.\"

Through the first quarter, industrywide shipments were down 1 percent to $2.63 billion, according to BIFMA.

The outlook presumes a mild U.S. recession, with a 1 percent decline in gross domestic product for the second quarter and a flat or slightly negative GDP in subsequent quarters, Reardon said.

The size of the downgrade in the quarterly outlook \"slightly surprised\" Reardon.
Given the economy\'s direction, he was expecting a downgrade in the outlook, but \"I just wasn\'t expecting the expectations to change to that degree.\"

Among the key economic drivers influencing the office furniture industry, the Conference Board late last month reported that its Help Wanted Advertising Index, consisting of print and online ads, stood at 19 at the end of March, down two points from the previous month and compared to 29 a year earlier.

Growth in new office construction, though up considerably from a year ago, slowed from February to March to 1.4 percent, according to the U.S. Department of Commerce.

The updated BIFMA outlook echoed the industry quarterly index earlier this month from Michael A. Dunlap & Associates, which found the industry slumping.

Michael Dunlap doubts the downturn will rival the 2001-03 period, when the industry lost $4.78 billion, or 36 percent, of sales volumes. He believes the BIFMA outlook actually is \"too pessimistic,\" especially for 2009.

\"I don\'t think we\'re going into that kind of dip, and I don\'t think we\'re going to see this decline continue into \'09,\" Dunlap said. \"I\'m still bullish.\"

At Haworth Inc., Chairman Dick Haworth said business so far this year has been \"good, not great.

\"It hasn\'t been what we wanted,\" Haworth said, though \"I\'m optimistic that we will have a good year.\"

The Holland-based Haworth had sales of $1.66 billion in 2007.

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