In 2020, the Covid-19 pandemic and related containment measures will have an unprecedented impact on the world economy and various industrial sectors. CSIL, Centro Studi Industria Leggera, which has constantly monitored the effects of the epidemic on the international furnishing market, has just published, as it does every year, its forecasts for Italy and the world in the following studies the “Forecast report on the furniture sector in Italy 2021-2023“ (Italian language, list price EUR 1000 + VAT), which analyses the future scenarios of the furniture market in Italy and the prospects for Italian companies on foreign markets; the “World Furniture Outlook 2021“ (English language, list price EUR 2000 + VAT) which provides historical data on production, consumption, imports and exports of furniture and includes consumption forecasts 2021-2022 for 100 countries.
We publish here a brief summary of the “Forecast report on the furniture sector in Italy 2021-2023“.
The macroeconomic framework in the three-year period 2021-2023
In 2020 the world economy will experience a shock due to the outbreak of the Covid-19 pandemic. The health emergency and the related containment measures have generated a global recession, unprecedented in historical terms in terms of magnitude and spread, against which the recovery scenarios are very uncertain. Global GDP is expected to fall by 4.4% in real terms, with varying trends across countries: emerging markets are expected to perform less negatively than advanced countries.
Among high-income economies, the overall effect of the pandemic in the US is estimated to have been less than in Europe, despite the large number of infections. Fiscal and monetary stimulus strongly supported demand, which also saw a re-composition of household spending.
In Europe, the pandemic had different economic impacts in different countries, and the outlook for recovery also varied considerably depending on the degree of virus spread, the stringency of public health measures taken to contain it, the sectoral composition of national economies and the intensity of national policy responses.
China, thanks to industrial growth, will be the only major economy to end the year on a positive note, albeit at a much lower rate than pre-Covid expectations.
By contrast, the economic outlook worsened considerably in India, which is still trying to control the pandemic and will therefore experience one of its worst recessions. In many other emerging markets, too, the outlook remains precarious. Global trade in manufactured goods, which had already shown signs of slowing down in 2019 due to trade tensions, is expected to end the year down by more than 8%.
The global scenario will show a rebound in 2021 and growth will continue in the following two years. Growth will thus be generalised to all major economies from the US to China and the EU countries, but these scenarios are subject to an exceptionally high degree of uncertainty.
The pandemic could also prove to be an accelerator of delocalisation processes, contributing to a progressive increase in the role of the domestic market in the various countries and macro-areas of proximity. A number of risk factors still remain, not only closely linked to the evolution of the pandemic and to progress in vaccines and treatments, but also to the resilience of economic systems and to additional geo-economic uncertainty factors (e.g. US-China tensions, Brexit...).
Economic scenario in Italy in the 2020-2023 period
The Csil Forecast Report provides a brief overview of the Italian economy for the three-year period 2020-2023. For Italy, the data confirm that in 2020 Italy's real GDP will fall by around 10%. Household spending is expected to fall by more than 10% in 2020, as is investment in machinery, equipment and construction.
In 2021, a substantial rebound effect is expected to support the growth of economic activity, which is forecast at 4%, albeit weakened by the second wave of the pandemic and the subsequent containment measures. With consumption recovering, but not enough to bring household spending back to pre-Covid levels, given deteriorating incomes and wealth and cautious consumer attitudes, investment will be the main driver of recovery. These will also be helped by the arrival of European funds focused on green transition, innovation, digitalisation and automation to accelerate the transformation processes already underway.
The furniture sector in Italy in 2020
The furniture sector is no exception in the Italian manufacturing landscape, showing the disruptive effects of the Covid-19 crisis containment measures on both the demand and supply side. In 2020, sales on foreign markets plummeted (-18% in real terms), in line with the fall in world trade, and domestic demand also contracted considerably (-23% in real terms). In the first half of 2020, there was a sharp drop in sales on the domestic market and on foreign markets, with a drop in total turnover in the furniture sector and in volumes produced. In the third quarter, however, with the reopening and resumption of activities following the lockdown months, economic data confirmed a rebound that was higher than expected. This rebound is also the result of a renewed interest in the home due to the long lockdown period and the need to integrate living space with study and work space (smart working). This has been a major driver of furniture purchases, although more than two months of inactivity cannot be offset by the good performance of a quarter. On top of this, the second wave of contagions in autumn/winter 2020 and the resulting new restrictive measures have caused business and household confidence to worsen again. These elements point to a more uncertain economic scenario and cast shadows on the solidity of the recovery of the main international outlets and the domestic market. Production in the furniture sector is therefore expected to close the year with a contraction of just over -20% in real terms.
Forecasts for the furniture sector in Italy 2021-2023
2021 will be a year full of uncertainties in which a growing potential foreign demand will again support Italian exports (just under 3% in real terms) and the domestic market will also resume growth (+2.9% in real terms) but elements of weakness will remain, most likely resulting from the persistence of measures to contain the pandemic also in the first part of 2021. The Budget Law for 2021 foresees the confirmation of the Furniture Bonus in the same way and a positive boost will also come from residential investments, as well as from the incentives activated in 2020 with the 110% Superbonus. The value of production in real terms will therefore increase by 3% at constant prices. It is estimated that furniture consumption will strengthen over the next two years at an average annual rate of 4.7%, driven by the upturn in building renovation and greater attention to the home environment, which has also become a place of work and study. Good use of Next Generation EU funds should provide a further strong boost to public and private investment. As things stand, however, it is believed that the recovery of the furniture sector will take place at a pace insufficient to allow the full recovery in 2021-22 of what was lost in 2020, given the deterioration in income and wealth and the cautious attitude of consumers that will continue in the medium term. It is therefore considered likely that we will have to wait until 2023 to approach pre-pandemic levels.