Even though it will be brief and mild, the furniture industry’s expansion and prosperity in 2023 are likely to be impacted by the current recession.
According to economists who are forecasting the economy for the coming year, a recession is imminent due to factors like declining consumer confidence, ongoing inflation, Fed rate increases, and lower savings rates. The fact that consumer spending is still steady and that job growth has quickly recovered from pandemic-related lows may lessen the impact.
In its global economic outlook report for the United States, The Conference Board cited the sputtering growth momentum in 2022 as one of the indicators of the imminent recession, along with the current wave of high inflation “driven by a confluence of supply and demand factors that we do not expect to resolve quickly.”
The Conference Board predicts that real GDP growth in 2023 will be close to zero, but other observers see a more favorable growth scenario—though not one that will be comparable to pre-pandemic levels. Furniture Today predicts a 2023 GDP growth rate that will be slightly less than 1%.
The U.S. economy will spend the majority of the first half of the year in recession, according to economists at Bank of America., U.K. and portions of Europe, continuing the pattern of shocks that shook businesses in 2022.
“This past year has seen significant market volatility due to surging inflation, geopolitical risks and central banks hiking at paces not seen in decades,” said The head of Bank of America’s global research is Candace Browning.
“In 2023, inflation should come down,” she said, adding “next year will continue to present uncertainties in the markets.”
Although interest rates are not anticipated to rise as quickly as they did in 2022, neither are they predicted to decrease. In early 2023, the Federal Reserve is expected to keep raising interest rates; a reduction won’t happen until 2024 or later, according to the Conference Board’s forecast.
In a speech at the Brookings Institution in November, Federal Reserve System Chairman Jerome Powell said the goal continues to be to move inflation down to 2% over time, and while rate increases were still planned, “it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down.”
All of this points to a continued moderation in consumer spending on furniture and bedding through 2023, which will have an impact on the furniture industry. The total estimated sales of furniture and bedding for the previous year were predicted to reach close to $124 billion, a 2.9% increase over 2021 but a lower percentage growth than in 2021.
And this year’s figures will confirm the trend of slower growth, with sales of $126.3 billion expected, an increase of just 1.9% from 2022. Furniture store sales will increase to $72.75 billion, an increase of 1% over the projected $72.05 billion for 2022, in line with the GDP figure.
The state of the housing market is another important indicator for the furniture sector. Furniture, bedding, and accessory purchases frequently follow housing starts and home sales.
The outlook for the coming year is regrettably not particularly promising. Realtor.com Chief Economist Danielle Hale calls it “nobody’s market, not friendly to buyers or sellers.” Even though there will be more homes available, prices and mortgage rates remain high “challenging affordability at a time when overall budgets continued to be squeezed.”
During the fourth quarter, the U.S. In the Home Affordability Report, a property data company called ATTOM found that median-priced single-family homes and condos were less affordable than historical averages in 99% of counties across the country where there was enough information to analyze. This is a significant increase from 68% in the same quarter of 2021.
“Prospective homebuyers — especially first-time buyers — can’t seem to catch a break,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “Home prices have increased by 15% to 20% annually in some markets over the last two years, on average. Now that home prices have plateaued and even declined in some markets, buyers are faced with mortgage rates that have doubled, making home purchases even less affordable.”
Housing starts, existing home sales, and new home sales are all predicted to decrease in 2023, which will only exacerbate the real estate problems. Lawrence Yun, chief economist and senior vice president of research for the National Association of Realtors, forecasts that new home sales will decrease by 6.8% and that median home prices will only increase by 0.3% after increasing by 9.6% in 2022.
Source: furnituretoday.com
