Since the early 1970s, we have published many forecasts for residential furniture and mattresses, although we have avoided doing so since 2017 thanks to the growing outside irregular influences such as tariffs, anti-dumping petitions and related factors.
These were largely academic exercises based on traditional economic theory. The forecasts were based upon demand factors including housing sales, household formations, inflation in home furnishings prices and consumer confidence. Then we considered the economy as a whole including GDP growth, interest rates, employment levels, governmental incentives/taxes, and other factors, and added to this are the global factors like any unusual logistics elements, international trade, shifts in major component costs or availability and a variety of other factors usually checked but seldom accounting for much change. Layered on top of all this are the demographic factors of the major age groups, migration and income shifts.
Truthfully, we didn’t expect to be correct but to at least have the direction (give or take) right. The purpose was to give furniture and mattress executives something to consider as they made their plans for the coming years. Our forecasts often created a reason to have a dialog with industry participants, especially if they found fault in our logic. Please remember that this project takes six weeks, and something within the economy changes within days of our study’s release, making some of its conclusions mute.
We are now two full weeks into reading the massive quantity of economic opinion, only looking at new thoughts since mid-May because any others did not give adequate input for the pandemic, the government’s economic response and more recently the multiple protests of various topics and severity. Triggered by “Black Lives Matter,” other themes have joined in, seeing an opportunity to get attention to their issues.
As most of you know, furniture and mattress demand has been pleasantly strong in the recent weeks as our stores reopened and the Internet continued to push our products. Some retailers are putting forth a massive effort during this period of strong demand. In my July 4th weekend newspaper was a handsome Rooms to Go insert, full color with all the important deals, but inside was another RTG insert with even more. As the old saying goes, “Make hay while the sun shines.”
But we cannot use the tools used in the past to make a forecast now. Yes, we must consider direct demand factors, the overall economic recovery, major changes within our trading partners and even demographics. No, we will not forget the Millennials.
Howevere, in our opinion, there is a lot more to consider. One reason furniture and mattress sales are strong is that customers are not spending as much elsewhere for vacations or air travel. In Richmond, not exactly a hub, our traffic in May was down 91% at our airport. Look at other obvious sectors that are being damaged by the pandemic and urban protests, such as going out to dine, attend various entertainment venues and, of course, the non-existent sports. These are all weak now, but with the passage of time and hopefully good progress on containing the pandemic, these will return and take more of the consumers’ dollars and possibly putting us in our place further down the priority pole.
This will be very interesting to consider and factor into our forecast. Wish us luck!
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July 27, 2020 at 09:05PM
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Blog: Figuring a forecast around ever-changing factors - Furniture Today
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