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Furniture industry to see modest growth to 2015, conference board says PDF Print E-mail
Written by Michael J. Knell   

OTTAWA (05 September 2011) - Canadian furniture manufacturers can look forward to modest upticks in productivity, revenues and net profit over the next five years, according to the summer edition of the Canadian Industrial Profile published by the Conference Board of Canada. However, the board cautions it won't be until after 2015 that it returns the production levels achieved before the recession struck in 2008.

Furniture was one of six industrial sectors included in the report - the others being aerospace products, motor vehicle parts, paper products, printing services and wood products.

"Uncertainty is the watchword for all of these industries. The current global economic turbulence increases the general risk to these industry outlooks. As well, industry-specific factors are adding layers of concern," Michael Burt, the board's associate director of industrial economic trends.

The board noted that furniture exports have declined in recent years, falling from one-half to one-third of shipments. "The U.S. housing market bust and intense international competition have contributed to the decline," its report said, adding, "With the U.S. housing sector proving slow to rebound, the growing middle-class in countries such as China, India and Mexico offer new markets for high-end furnishings.

"The industry can therefore expect modest growth over the next four years, but production will not return to its former peak levels within that timeframe," the board believes.

The Conference Board noted in its report - which covers not only residential but also contract furniture and allied products such as kitchen cabinets - there are about 4,000 businesses in Canada making furniture, although 97% of them have fewer than 100 employees. Indeed, 64% have fewer than 10 employees. In a drastic change from the years immediately following free trade, the board said there isn't a furniture manufacturer in Canada employing more than 500 people.

The industry is concentrated in two provinces - Ontario and Quebec. Between them, they account for more than 80% of all the furniture made in this country.

Industry revenues grew 2.7% in 2010 to just over $10.7 billion, the first annual gain in more than three years. For 2011, the board is forecasting addition growth of 3.2% giving the industry total revenue of $11.1 billion. Looking out to 2015, the forecast calls from industry revenue to climb $13.1 billion - just below the $13.2 billion generated in 2007.

The industry can also expect to see gains in productivity. After falling 1.1% to $41,700 per employee in 2010, productivity will climb 1.8% to $42,400 this year and grow steadily over the next three years to reach $45,400 in 2015.

Net profit margins are also expected to improve. After holding steady in 2009 and 2010 at 2.4%, the board expects them to fall to 1.8% this year before climbing steadily to 3.0% in 2015. These will also be a drastic improvement over the industry's collective net profit margin of 1.2% in the 2007 peak sales year.

The Conference Board also encouraged furniture manufacturers to look further afield than the United States for future export markets. "A growing middle class in countries such as China, India and Mexico is creating a new market for high-end home furnishings. Companies that product high quality and hand-crafted furniture could benefit from that trend," the board noted.

At home, the industry is facing a debt burdened consumer. "This could limit the ability and willingness of Canadian consumers to finance the purchase of furniture," the board said.

Much of the industry's growth is also dependent on a recovery in the U.S. economy, which remains the industry's largest export customer. "The anticipated industry recovery is largely dependent on a turnaround in the U.S. housing market," the board said. "If that recovery is slow to materialize, the industry's output could be weaker than expected."

Published annually, the board's Canadian Industrial Profile provides outlooks for 23 industries and is produced in association with the Business Development Bank of Canada. For more information, visit the Conference Board of Canada's web site at www.conferenceboard.ca.

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