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North American office furniture market to make modest gains in 2008
The following report includes revised information and figures on the North American office
furniture market, which were originally published in the North American section of the July and
August 2007 Tropical Timber Market reports (TTM 12:14 and 12:16). Figures were
determined by analyzing a number of factors, including corporate profits, employment levels, business
investments and government expenditure.
Growth in the US office furniture market in 2006 stood at 7.2%, bringing the market size for the
first time to a value in excess of USD40 billion. With lower corporate profits,
slower employment growth and much of the pent-up demand for office furniture being satisfied in the US,
experts predict slower growth of about 1.8% in 2007 and 3.9% in 2008. Due to the continued
satisfactory performance of Canada¡¯s service sector, experts predict growth of office furniture
consumption to be down only marginally in 2007 and 2008, or about 7.5% each year.
This would bring the Canadian office furniture market to CAD5.7 billion this year and to CAD6.2 billion next year.
In the United States, growth of pre-tax corporate profits in 2006 stood at 13.2%. This was up
from 11.5% in 2005. Due to the slowdown of the US economy, corporate profit
growth for 2007 and 2008 will be much slower, anticipated to be only in the 5% to 6% range. Coinciding
with the good corporate profitability during the past few years, the job market improved as well. For this year and
next, experts estimate annual advances of only 1.1%, which translates to approximately 1.4 million new
positions each year. Business investments had also progressed at a rate of 6.6% in 2006. However, experts
anticipate a significantly lower growth rate of corporate investments, below 4% for 2007. This may have a
negative impact on office furniture consumption. Indeed, investments in machines & equipment ¨C which includes
office furniture ¨C is on a downward trend. After advances of 5.9% in 2006, the performance this year will barely
reach the one percent mark, but may be a bit higher in 2008 if interest rates remain low.
Canadian business profits (pre-tax) rose by a healthy 11.9% in 2005. Unfortunately, due to the
strength of the Canadian dollar, corporate profitability came under pressure in 2007 and the
growth rate did not remain as high as in 2006, dropping to 5.0%. Experts believe that
pre-tax profit growth in Canada will remain at the same low level of about 5% in 2007 and 2008.
Business investments are strongly influenced by corporate profits, albeit with a considerable
time lag. Experts predict a growth rate for investments of only 2.3% this year and
about 5% in 2008. Employment has also been relatively strong in the Canadian economy during the past two years.
However, employment growth receded to an annual rate of about 2.1% this year and will
be still lower at about 1.1% in 2008.
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