|
Trends point to slower growth in Canadian office furniture market
This last article of a four part series covers trends in the Canadian office furniture market.
Corporate earnings are a significant driving force for office furniture consumption.
Canadian business profits (pre-tax) rose by a healthy 11.9% in 2005. Unfortunately, the growth rate did not
remain at this high level last year and dropped to 5.0%. The deterioration was and still is
partially due to the spillover effect of the worsening American business environment.
Furthermore, the strength of the Canadian Dollar also dampened corporate profitability. With
Canada¡¯s heavy export reliance, any currency shifts are immediately reflected in the bottom line of corporations.
Experts believe that pre-tax profit growth in Canada will remain at the same level this year and next.
Business investments are strongly influenced by corporate profits, albeit with a considerable
time lag. Investments in machinery and equipment rose by 7.4% last year. In line
with sagging business earnings, the strong investment climate will not be repeated in 2007. Experts predict a
growth rate for investments of only 2.0% this year.
Governmental expenditures have been growing at a rate of 3.9% in 2006. Experts predict slower growth rates in the
years to come, but in view of Canada¡¯s continued budget surplus, it is likely
that government investments may remain above the 3% growth mark.
The employment market has been a relatively strong segment in the Canadian economy during the past two
years. It grew by 2.0% in 2006. This is equivalent to over 200,000 new jobs.However, employment growth is likely
to recede to an annual rate of about 1.5% this year and next. Similar to the US, there is sufficient vacant office
space available in Canada to accommodate any expansion of office jobs. A possible exception may be Calgary and
Toronto where vacancy rates have become quite firm. Commercial construction in Canada has been
advancing by 12.9% last year and experts predict an annual growth rate of 7.4% in value during 2007.
Average annual office furniture sales in Canada (at retail prices and including recycled furniture)
showed steady growth throughout this decade. Growth last year was in the 9.6% range ¨C up
from 7.2% the year before ¨C raising the market value for the first time above the C$ 5 billion
mark. Due to the continued satisfactory performance of Canada¡¯s service sector, we predict
office furniture consumption to slow down only marginally in 2007 and 2008, that is to about
7.8% in each year. This would bring the market to $ 5.8 billion this year and to $ 6.2 billion
next year.
|
