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Italy: A Call For Optimism

COSMIT/FederlegnoArredo studies show that Italy’s furniture export and consumption may not be as dire as imagined. Both industry authorities are certain that Italians are in good position to face up to challenges ahead.

The as-yet preliminary end-year figures indicate that the entire supply chain closed in 2008 with a larger than forecast slump in sales (-5.6%), although at EUR 38 billion (US$53.7 billion), wood furnishing is still one of the most important sectors for the Italian economy: the second Italian manufacturing industry sector in terms of active businesses and the sixth in terms of workforce.

Wood Furnishing System

(Values EUR millions at current prices)

An Overall Picture Of The Wood Furnishing Sector

The data is therefore confirmation of the difficult period the international economy has gone through, despite the fact that it is internal consumption that has suffered most: almost EUR 32 billion in 2008 made for a 7.8 percent drop, compared with the previous year. With regards to exports, representing 35 percent of sales in the supply chain as a whole but accounting for 52.5 percent of furnishing sales, the decline is certainly less marked than the most pessimistic forecasts had predicted. After the sharp upturn in overseas sales during 2006 and 2007, a two percent drop is by no means a positive result, but it is an important marker for the competitiveness of Italian products.

"In the economic crisis that we are currently experiencing,” said Rosario Messina, President of FederlegnoArredo, “we can identify not just an element of challenge and danger but also a reason for optimism and undoubtedly an opportunity… Much still remains to be done, but businesses have responded well”.

According to Cosmit’s President, the current crisis also marks an important opportunity for our country, for Italian businesses and for the wood-furnishing sector. "It is clear,” Carlo Guglielmi, President of Cosmit, “that the global economy, the financial regulations, the roles of the Governments and the Institutions that oversee international trade are going through a time of change… Why then should we not be optimistic: we are one of the few advanced countries in the world with excellent manufacturing industries while others have been content with simply being commercial and sorting centres”.

The supply chain data also take account of a major growth differential between upstream and downstream, between the wood sector that discounts the chronic dependency on raw materials and the furnishing sector in which exports are still at good levels, despite this difficult period. In fact, the wood sector came off worst during the latter months of 2008, due in part to the destocking effect engendered by many businesses: sales fell by 7.5 percent (an overall total of approximately EUR 15 billion), heavily influenced by internal consumption which plummeted by 9.1 percent, which was partly also attributable to the sharp downturn in construction which led to a considerable fall in demand for all wooden construction materials.

Focus On Furnishing

The furnishing sector, however, closed with a significant drop (-4.3%) which was more contained, nonetheless, with sales nudging EUR 23 billion. The substantial import stability (EUR 2.7 billion), of which only 20 percent related to internal consumption, was offset by a six percent drop in internal demand which brought it back to just over EUR 13.5 billion.

"Two factors had a bearing on the drop in internal consumption,” continued Guglielmi. “On one hand there was a loss of faith on the part of families, which rebounded on consumer durables, and undoubtedly affected furnishing sales, and on the other there was the slum in the real estate and the rental markets, even before the construction industry was hit by a sharp fall in demand. The sharp slowdown in the real estate market had an immediate impact on internal consumption, while the fact that Italian companies suffered to a lesser extent than others on the international markets is largely attributable to the quality of our products. The 1.3 percent drop should be interpreted in a positive vein compared with what might have been expected and with what many other sectors have experienced."

The modest drop in exports testified to by almost EUR 12 billion has also led to a positive cumulative trade balance of over EUR 9 billion, albeit approximately 200 million down from the previous year’s results. The data on companies and employees are significant if read against the background of the economic climate: although companies have suffered, and small artisan businesses in particular have registered an overall decline of 2.6 percent in numbers, we must allow ourselves to be pleased with the employment figures, which have largely held their own (-0.5%), and for which, according to the Messina, there are very definite reasons.

"Despite all its internal difficulties, our country is well equipped to tackle this crisis head on,” said Messina. “Family-run businesses, because of their small to medium size, have a number of limitations to cope with, but at times like these they are in a position to tighten their belts and focus on medium-term objectives. There are many cases in which families have fallen back on their own reserves during a credit crunch or a lack of liquidity and, equally, family-run businesses offer greater flexibility in terms of choice when times are hard”.

During the first 11 months, Russia (+17.5%) and the UAE (+37.7%) saw an average annual confirmation of the positive results of the last few years. France (+0.5%), Greece (+4.5%) and Austria (+0.8%), while not registering significant increases, still proved themselves able to withstand the effects of the crisis. The situation in the two markets worst hit by the credit crunch, the UK (-12.8%) and the US (-21.7%) in particular, is altogether different, and the financial crisis has had a major impact on consumables and the real estate market in countries such as Germany (-4.5%) and Spain (-13.7%).

Even sector-wise, there were notable differences: foreign sales of kitchen furniture (+5%), bedroom furniture (+0.9%) and office furniture (+0.2%) were up, while exports of upholstered items (-8.6%), chairs (-4.7%), dining and sitting room furniture (-2.9%) were down. The export trend for lighting appliances was also positive, with a 1.8 percent increase.

Messina added: "It is true that our sector is experiencing huge concerns about the lack of consumer trust, which is inevitably reflected in furniture sales. However the incentive to buy furniture today, despite all its shortcomings, is a sign of the interest in our sector that we truly deserve. Certainly we would have preferred to help young couples and to have had an incentives scheme that was absolutely unconnected with building restructuring, although the latest information from the Revenue Agency is that tax discounts are available even for small adjustments to plumbing or electricity systems. The recent Agenda approved by the Chamber leads us to hope that the timeframes for these rebates will be extended, otherwise the timing would be too short”.

“The policy of consumer incentives is undoubtedly a good road to go down short term, but we would like to flag up an idea that might satisfy both the need to kick start the economy and the need to attract tourists to Italy. I am talking about the possibility of hotels and hospitality facilities in Italy being offered incentives for modernising their furnishings as well as for architectural restructuring. This would be a crosscutting measure that would help to breathe new life into many of the sectors in the hotel supply chain and would also guarantee the upgrading of the hotels available in a country badly in need of new policies for tourism. Upgrading our hotels is now a priority, even in terms of events such as the Saloni, which generate a huge turnover for business tourism, but which has no chance of impacting on the quality of service or on the selling price. We need to put an end to events that bring in thousands of visitors being seen as an incentive to put prices up, as has been the case over the last few weeks, with no matching guarantee of quality, however,” Guglielmi stated.

This article is supplied by COSMIT- organiser for the annual iSaloni exhibitions in Italy, New York and Moscow. The iSaloni, incorporating Salone Internazionale del Mobile; Eurocucina; SaloneUfficio; and International Bathroom Exhibition, will be held on April 14-19, 2010, in Milan, Italy.

Photos courtesy of Salone Internazionale del Mobile, COSMIT; product and event shots by Saverio Lombardi Vallauri.