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Welcome to 2017

 4 January 2017     Michael J. Knell 

Time flies when you’re having fun. That’s what the old cliché says and I’m honestly not sure if it’s all that accurate. After all, 2016 whizzed right by. It began and was over long before most of us had a chance to stop and take a breath.

When the final numbers have been crunched – a few weeks from now – I imagine we’ll discover 2016 produced okay numbers for both manufacturers and retailers working in the furniture, mattress and major appliance sectors in Canada. As I’ve reported elsewhere on the site, furniture store sales for the year-to-date ending in October, 2016 sales were up 4.5% over 2015. For the trailing 12 months, also ending in October, sales were up 4.7%. Not bad but slightly off the pace set in 2015 when furniture store sales climbed 5.6% – the highest rate the industry has achieved since the financial crisis of 2008.

While many world events in 2016 gave me pause, I was heartened to read Douglas Porter’s take on Canada in 2017 – which was a lot more optimistic than most would think. Porter, chief economist for BMO Financial Group, believes 2017 could see a moderate turnaround for the beleaguered Canadian economy.

“After two tough years for growth, Canada could benefit from the combination of higher oil and other commodity prices, domestic fiscal stimulus, and stronger U.S. growth,” he wrote recently, adding his organisation is forecasting that Canada’s GDP (gross domestic product) will gain 2% in 2017 – versus an average of just 1.1% for 2015 and 2016.

He also believes Alberta should have a good year, thanks to firmer energy prices, fiscal stimulus (from both the federal and provincial governments), pipeline approvals and a bounce back from last year’s devastating fires around Fort McMurray.

Since Canada’s economy is trade dependent, he seeing better commodity prices in 2017 and not just for energy items such as a natural gas and oil but for things like wheat, barley, lumber, copper and nickel, among others.

He’s also forecasting that despite their incoming president’s anti-trade rhetoric, the U.S. trade deficit for merchandise will widen in 2017 – that is, Americans will continue to buy imported goods at a faster rate. And that’s definitely a good thing for Canadian manufacturers, especially those making furniture.

While Porter’s optimism on the ‘big picture’ front is encouraging and good to hear, there are a few things people in this industry need to be aware of. First and foremost, interest rates will begin increasing sometime this year – that’s something almost every expert such as Porter is forecasting, and for good reason.

What’s more, the long-foretold and anticipated cooling in the housing market has begun. Starts began shrinking in the second half of 2016 and the trend is expected to continue through 2017. Sales of existing homes are forecast shrink 3.3% this year. When one considers that during the three years immediately following a house sale, the consumer spends an average of $6,500 on furniture and appliances, the impact of this slowdown in housing sector could be significant.

We also need to be aware of rising household debt – which reached new record highs in 2016. When interest rates go up, things could get tight for many of our customers since the majority buy our products and services using credit.

Canadians will continue to buy furniture, mattresses and major appliances in 2017. Of that, I’m absolutely convinced. The competitive landscape will continue changing. Consumer demands will continue evolving and their online purchases will keep growing – although more modestly than e-commerce’s more fanatical adherents would like. Social media will continue to be an ever more powerful marketing necessity.

So stay positive. There’s a lot of opportunity out there and a lot of work ahead of us. What that really means is there’s also a lot to be hopeful about.

 

 

 


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This HGO article was written by:
Michael J. Knell
Michael J. Knell

Michael is the publisher and editor of Home Goods Online. A seasoned business journalist, he has researched and written about the furniture, mattress and major appliance industries in both Canada and the United States for the past three decades.


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Home Goods Online.ca and its accompanying newsletter - HGO This Week - covers the furniture, bedding, appliances, consumer electronics, accessories, lamps and lighting and floor coverings product sectors of the big ticket home goods market in Canada. HGO is also a forum for the dissemination of market research and hard-hitting articles on best practices for Canadian retailers.

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