US economy from sofa view: fragile, improving

Associated Press Modified: October 19, 2012 at 10:30 am •  Published: October 19, 2012
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HIGH POINT, N.C. (AP) — This year may be a turning point for the furniture industry, which has taken an especially hard hit during the recession as credit was limited and people put big-ticket purchases on hold to pay monthly bills.

That's the growing sentiment for about 75,000 industry insiders who this week crowded into High Point for the world's largest furniture trade show in a city built by furnishings. The past couple of months have seen a collection of government and private data pointing to what seems to be a brightening U.S. economy. Inflation is low. Homebuilder confidence is at its highest level in six years and retail shoppers are spending more.

Most importantly for furniture sales, more Americans are buying and moving into homes that they'll look to furnish, pushing up sales and prices after a six-year slide.

Buyers stocking furniture stores for the coming months seemed more willing to place orders at the High Point Furniture Market that ended Thursday, even if it's too soon to celebrate the recovery of the two-thirds of economic activity that depends on consumers. Nearly 90 percent of those attending the market are U.S. based.

"The last four or five years it was pretty doom and gloom. I'm seeing more optimistic people this time around," said Braden Richter, formerly a furniture manufacturing executive and now CEO of e-commerce retailer LuxeYard Inc. "I'm seeing a lot of fresh product. When times get tough, people keep reshowing the same thing because it costs money to do R&D. It looks like the factories have definitely spent money on R&D, so they must feel good about it, too."

For years, the moderately priced, made-in-America sofas and upholstered chairs turned out by Lancer Inc. battled not only competitors but bigger economic forces. The Sept. 11 terrorist attacks prompted buyers to hold back. During the past decade's good years, furniture manufacturing shifted rapidly to China and other low-cost countries. Then, the housing bubble burst and sales crashed.

Now Lancer's sales are about 12 percent ahead of last year for products that include sofas averaging about $1,000 to consumers, sales vice president Peggy Thompson said.

"Last year was somewhat better, but this year is even better," she said while seated on one of the company's sofas in a showroom at the trade show.

The independent furniture stores who are the major customers of Lancer and other manufacturers are also doing better, according to Sageworks Inc., which compiles financial data on private companies. The furniture stores it tracks saw sales increase by about 3 percent in 2011 after several years of declines, including a 9 percent drop in 2009. In the past 12 months, those small businesses saw sales increase by more than 8 percent and profit margins rise by almost 3 percent.



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