Furniture and Patio Furniture Slow Sale

The Economy's effects on Furniture and Bedding sales;

By: Finest Linens and Things

At the present time, the American economy is plagued by a multitude of problems and no relief is in sight as yet. The sub-prime mortgage crisis is only the latest crisis to beset the country. GDP growth has been declining continuously from its peak in the 1st quarter of 2006 and growth this year will be only around the 1.9% mark. This is the lowest rate during the past five years and compares to 2.9% last year. We predict a modest improvement next year, but the rate is not likely to surpass 2.5%.

Personal income growth is one of the most important leading indicators for predicting furniture consumption. Helped by increased job creation last year, personal income held up better than the economy as a whole. Income growth stood at 6.6% last year, up from 5.9% the year before. However ? in conjunction with less robust employment growth in 2007 ? it may slow down to about 6.2% this year and may even drop below the 5% mark in 2008. If we take inflation and taxes into account, the anticipated growth rate of real disposable income will be much less, that is only about 3.0% this year and 2.7% in 2008.

Growth of American consumer spending stood at 3.1% last year. Due to the sagging consumer confidence, it will lag behind the growth of personal income. While this year?s growth may drop only moderately to about 2.8%, the decline in 2008 may be more pronounced to an anticipated level of about 2.3% only.

The durable consumer good market is subject to erratic fluctuations as it is quite sensitive to interest rates and consumers? mood. After growing at 19.8% in the first quarter of 2006, it fell by -0.1% in the second quarter, only to rise again to 6.4% in the third quarter of 2006. The final quarter achieved a rate of 4.4% (all rates are annualized). Last year as a whole was 3.8% ahead of the previous year and we predict the same performance for this year. This still fairly good showing is not likely to be repeated in 2008 when we anticipate an annual rate below 1.5%.

Thanks to low mortgage rates, residential construction remained a very strong sector of the American economy up to the middle of 2006. Thereafter, the market went into a declining mode. Last year as a whole showed a decline of -4.6% compared to 6.6% growth the previous year. The housing market remains oversupplied and is predicted to suffer another hefty decline of -15.7% this year and a further decline of about -8.7% in 2008. In volume terms, this translates to 2.07 million new housing units in 2005, 1.81 million last year, an expected 1.42 million in 2007 and only 1.32 million next year.

In line with the advances of disposable income, furniture consumption in the USA grew at a rate of 6.9% in 2006, up from 4.7% the year before. This year may witness a painful slowdown to an anticipated rate of only 2.2%. This would bring the market value to about $ 86.4 billion this year compared to $ 84.5 billion last year. Growth for 2008 may be at the same slow speed, lifting the market to about $ 88.3 billion.