Recovery has started and we can see it, mostly in the world’s economic areas that even in the middle of the crisis did not stop running (Asia ahead): both years 2010-2011 will be decisive to invert the negative trend of the world’s economy. But it is too soon to say it, because the strength of the new recovery trend still must be evaluated, net of government and other supports after the recent months’ economic difficulties, including the financial and cash benefits supporting production and sales activities. This is the warning coming from the “World furniture outlook 2010/2011” by Csil – the Milan-based light industry study Center specializing in market research and consulting for the furniture, timber-design, lighting and home appliances’ industry – with the contribution of professionals and operators from 60 major countries about newly emerging scenarios. As usual, the presentation of the report on the global furniture market (upon data from different international and local sources) took place during the Milan Furniture Salon and, right in the middle of the international design exhibition, provided an opportunity to think about the industry future.
According to the Csil report, international furniture production is equal to some 376 billion US dollars. High-income countries alone cover 58 percent of the market: United States (15 percent), Italy (8 percent), Germany (7 percent), Japan (3 percent), France (3 percent), Canada (3 percent), United Kingdom (3 percent) and other countries (16 percent). Usa, Italy, Germany, Japan, France, Canada and United Kingdom together reach a production of about 159 billion dollars. Starting the recovery thanks to the slowdown induced by the crisis for more advanced countries, medium and low-income manufacturing countries represent 42 percent, 25 by China, 3 by Poland, 2 by Brazil, 1 by Vietnam and 11 by other countries with the same features. In particular, production is growing fast in China, Poland and Vietnam also thanks to the investment in new plants, designed and manufactured to enhance the export market.
During the period from 2003 to 2008, production has grown as follows: Turkey up strong (+20 percent), followed by Russia (+28 percent), Ukraine (+22 percent), Lithuania (+21 percent), Poland (+18 percent), Romania and the Slovak Republic (+17 percent). The Asian market continues its race with the boom of Vietnam (+32 percent) and China (+30 percent), followed by India (+14 percent) and Malaysia (+12 percent). In South America, Brazil stands out (+13 percent). During the 2000-2007 period, out of the top five importers (United States, Germany, France, United Kingdom and Canada), United States and United Kingdom recorded the highest increase passing from 15 to 26 billion dollars and from 3 to 9 billion dollars, respectively, while France and Germany recorded lower increases. In 2009, the outlook changes and negative trends are recorded in the United States (in 2008 down to 24 billion and again to 19 billion last year), and later on in all top five countries. Similar trend for export, where China, Italy, Germany, Poland and United States rank first, all with negative signs.
In addition, according to Csil, another aspect must not be underrated in the analysis: the most important structural change in the last decade has been the increase in the opening degree of furniture markets expressed by the import-consumption ratio up from 24 to 30 percent on a world scale between 2000 and 2008.
What are the 2011 forecasts? The world Gdp is expected to increase by 3.9 percent in 2010 and by 4.3 percent in 2011, with a lower increase in countries with advanced economies which will grow by 2.1 and 2.4, respectively. The “map” traced by the “World furniture outlook 2010/2011” allows to see where the best growing trends will concentrate. The list is headed by Eastern European countries (Russia first of all, after the last two years’ slowdown), but also Turkey, South Africa, Mexico and leading South American countries (Brazil, Chile and Argentina), besides the Middle and Far East (China, India and Indonesia). In a stable Western Europe only Greece stands out, with Csil data showing a decrease. Though at lower speed, also countries like France, Australia and United States grow, and they even talk about the end of the most critical stage with a light coming from a renewed market opening. Down by 20 percent in 2009, the world furniture business is expected to go back to growth in 2010 (+2 percent) and 2011 (+5 percent), passing from 92 billion US dollars in 2009 to 94 in 2010 and 98 in 2011.
Starting over from the East
After consumption down by 7.5 percent in 2009 and import down by 11.8 percent, in the United States the market starts to react to spurs with positive perspectives of increasing business partnerships (starting from Vietnam and Mexico), thanks also to the recovery of marketing and sales activities, and credit availability. Yet, to make order in the process of growth in the furniture industry we must turn to the East. India confirms its role among the most interesting markets. With export equal to 170 billion dollars in 2008-2009, expected growth is at least 9-10 percent throughout the next 25 years, also thanks to the social changes taking place in particular among 64.3 percent of the population between 15 and 64 years of age: young people tend to consume better and spend more, purchasing also high quality products abroad. In 2010 alone, domestic consumption will grow by 6 percent.
China suffers from the crisis but keeps on strengthening its domestic market. Production slows down in 2009 with an increase of 13.5 (+20.38 percent in 2008) and the increased domestic consumption affected the Gdp for 12.6 percent, which remains positive (+8.7 percent) despite reduced export (from +21.94 percent in 2008 to -6 percent in 2009). Always in the East, in Malaysia, Thailand and Vietnam – Countries with a rapid production growth yet technologically backward – we find the most promising expectations for Italian woodworking machinery and tools.
With 2010 forecasts showing domestic consumption equal to 8 billion dollars, production for 5.6 billion, export for 1.6 (-0.13 percent) and import for 650 million dollars, Turkey maintains its role on the international market. Among outsiders, Brazil stands out, importing from China, Germany, Usa, France, Japan and Italy, and exporting mostly towards the Usa, Argentina, France, United Kingdom and Angola – leading growing country in the African continent where an important Brazilian business presence is emerging. Some help to the industry might come from a market restoration and rationalization, and from a reduction in taxes on industrial production which would bring benefits to final consumers as well. Good recovery expectations also for Australia and Norway, not integrated in the euro area and more connected to the currency exchange fluctuations.
The central role of the furniture industry in the European economy is also confirmed by Epf data (European panel federation): this industrial sector receives 49 percent of manufactured panels. And then Austria has brought in its experience through the example of the Egger Group (wood-based products and decoration): increased quality and sustainability to compete on the market.
Technologies, Russia re-starts its engine
Besides furniture, the recovery can be seen also in the woodworking machinery and technology industry; but taking on the pre-crisis path is not that easy. This is what Acimall data say, the Italian association gathering 206 machinery and tools manufacturers. In Italy in 2009 the overall industry turnover reached 1,228 million euros; moreover, in Italy there are companies that cover 20 percent of world production and export 70 percent of products. The crisis deeply affected export and also an already slower domestic market in its growth and evolution process. According to the orders in the fourth quarter 2009 (a year that recorded minimum industry orders) as compared to the same period in the previous year, the domestic market has lost 22.4 percent, with export gaining 17.6 percent for an average increase of 5.5 percent. 2009 data on the production of machinery and tools show a production equal to 1,228 million euro down by 42.2 percent, export equal to 874 million down by 42.2 percent, import also down (by 37.5 percent for 123 million), just like the trade balance (-43.2 percent for 751 million). Ranking second in the 2009 list of major technology exporters with a 43.9 percent contraction (after Germany, down by 40.8 percent and before China, -25.3 percent), Italy exports 51.2 percent of its products to the European Union, 15.9 percent to extra-European countries, 12.5 percent to Asia, 7 percent to South America, 5.8 percent to Africa, 5.5 percent to North America and 2.1 percent to Oceania. Last year’s major destination markets: France with 86.3 million Euro in value (-20.7 percent on 2008), Germany with 68.5 (-34 percent), Belgium with 41.8 (-16.9 percent), Brazil with 37.9 (the only positive sign with +13.7 percent), Poland with 35.9 (-47.3 percent) and Russia with 34.3 (-65.2 percent). First signs of new orders coming right from Russia make room for hope in a real industry recovery in the upcoming months.
