Industry Overiew
MANUFACTURING TRENDS
In constant prices (adjusted for inflation) estimated industry manufacturing revenue in 2008/09 retreated 4.3 percent on the prior year. In real terms industry turnover has not made significant headway in the last five years.
Industry gross product declined in the same period notwithstanding a strong economy until the global economic collapse occurred in late 2007. The immediate outlook is brighter with growth expected to resume over the next five years as the economy improves.
Industry employment has been flat with about 68,000 direct manufacturing jobs.
Wages and salaries have also slipped marginally over the last five years in constant prices.
Manufacturing establishment and enterprise numbers are also slightly lower although the base remains substantial. A long standing inhibitor to a stronger more vibrant industry is that nearly half of all enterprises employ less than 50 persons and ninety percent employ less than 100 in the four core manufacturing classes,.
In the main industry benchmarks, key operating ratios are less efficient than most other industries stemming from industry hallmarks of labour intensity and limited production runs. The relative capital and labour intensity of this industry varies according to the scale of the operations and the industry segment in which firms operate.
Recently acquired data confirms that kitchen installations in new homes, and renovations in existing homes, make up a sizable component of the industry and is one part of the industry that is less vulnerable to cheap imports.
IMPORTS
Furniture imports continued to grow in 2008/09 notwithstanding the economic downturn. Wooden and upholstered furniture imports from China continue to be the industry class that has been hardest hit. More than half of all furniture imports originate from China. The average cost per unit of wooden framed upholstered seating from China and other Asian countries remains considerably lower than traditional countries of origin such as Italy. Imports most impact the retail sector where about two thirds of furniture turnover is comprised of imported products.
EXPORTS
Industry exports development has failed to materialise and remains a minor part of local production output. New Zealand is the only export market of any significance with about 40 percent of exports (valued at $52 million) shipped to NZ in the last year.
RETAIL TURNOVER
In constant prices, retail turnover fell 5 percent in 2008/09 on the prior year. Almost certainly this downturn would have been more severe were it not for government economic stimulus measures and historically low interest rates. These factors were offset by lower new housing activity which makes up more than half of retail furniture turnover.
The decline was most severe in Victoria (-12.8%) and Queensland (-9.1%). Surprisingly, NSW defied the trend with modest growth on the previous year.
The number of specialist furniture retail establishments is slowly rationalising.
Imports share of retail turnover grew in a scenario that saw softer retail sales volumes with no abatement in imports volume entering the country.
WHOLESALE TURNOVER
Whilst niche markets exist, the wholesale furniture sector has been static for an extended period in a climate in which retailers largely bypass wholesalers to source supplies directly from manufacturers and from overseas. Similarly wholesale transactions in the commercial furniture sector are limited by manufacturers absorbing the wholesale function to improve margins.
INDUSTRY ECONOMIC INDICATORS
The drop in furniture and furnishings retail turnover has been about the same as floor coverings but sharper than electrical appliances and retail turnover as a whole.
At the same time Furniture & furnishings prices have not risen to any extent in five years other than a small lift in the most recent year.
Rising timber costs and other raw materials have added further pressure to industry profitability.
INDUSTRY OUTLOOK
In an improving and resilient economy with rising consumer and business confidence, steady population growth and the prospect of a resumption of growth in new housing activity, the industry seems to have ‘weathered the storm’ for an outlook that is more optimistic than at any time in the economic crisis of the last two years. A full recovery will take time as the impact of commercial and domestic building activity and other key indicators invariably lag behind the general economy.
