2020: Better year for furniture makers

Tension has risen in the Middle East on account of a US initiated attack on Iran’s most revered general in Iraq. Consequently, the rest of the world is wondering if the current situation may result to a full blown war. Though it is too early to tell, countries all over the world reacted, accordingly, and have informed their citizens on the most logical thing to do given the circumstances.

Reactions are so varied. While wealthy countries like the United Kingdom simply advised their citizens to refrain from travelling to Iran, poor countries, like us, have started repatriating theirs (those who are simply trying to make a living in the region).

Well, to the citizens of the affluent countries, it is just a matter of going to another holiday destination where they feel safe. On the other hand, to the poor ones their repatriated or returning citizens are just merely added into their burgeoning jobless statistics.

For us, this is a sad reality. So that, as we try to find ways to help our returning countrymen find jobs and address the resulting decrease in dollar remittances, wealthy countries are continuing their strides toward prosperity.

Take the case of the USA. Though the Americans initiated this raucous incident, they remain unaffected economically. In fact, their forecasts are just too rosy, to say the least. World economists may have differed in its forecasts but all of these are pointing to upward trajectories.  Moving forward, these economists are looking at growth rates at no less than two percent for 2020.

However, despite the fact that we are in the receiving end of this US initiated incident in Iraq, we can still take a sigh of relief as this development (of the US economy) bodes well to some sectors of our industry. It is a known fact that the US Gross Domestic Product is consumer spending driven. Known globally as habitual big spenders, countries like us stand to benefit.

For one, Fannie Mae chief economist Doug Duncan said that the “U.S. housing market will be an engine of growth for the economy in 2020.” He said further that “Housing appears poised to take a leading role in real GDP growth over the forecast horizon for the first time in years.” Moreover, he said that “We now expect single-family housing starts and sales of new homes to increase substantially.”

After dragging for many years, according to Duncan, it is going to change in 2020.  Sales, according to him, of new houses probably will jump 12% in 2020, reaching the highest level since 2007. Single-family housing starts probably will increase to 888,000, also a 13-year high, he added.

This very encouraging information is so relevant to us. As we track and analyze the rise of “housing starts” as well as “new home sales” in the USA, we must be aware that there are many industries whose fates are tied to residential construction. Apart from the easily identifiable construction materials like lumber, cement, roofing materials, etc., the furniture industry is among those directly affected by its movements. Why? Owners buy furniture once their houses are finished.

Statistically, “housing starts” records building activity at its inception, measures the number of private housing units on which construction is begun each month. It includes all types of accommodations designed as family living quarters, whether single units or apartments.  Apartments, however, are counted separately, so that a 5-door apartment building is tabulated as 5 housing starts.

These statistics are used in the USA as indicators of the state of the economy. These are very important indicators because they show how much money the general public has. If there is a rise, it will simply mean there is more money in the economy. If there is a fall, it means the economy is cash strapped and joblessness must have gone up.

For us Cebuanos, USA’s “housing starts” statistics are doubly relevant. Rightly so, because the USA is a major market of our furniture makers. Thus, any drop in the “housing starts” statistics coupled with an unequivocal dependence in the US market could mean disaster for Cebu’s furniture industry. Any rise, however, could mean bounty for industry players and their dependents.

Coupled with the construction boom in Cebu, these are bits of good news. For our furniture makers’ sake, hopefully, the USA and Cebu (local construction boom) can sustain it.