FederlegnoArredo’s proposals to relaunch construction industry

Export has confirmed to be the driver of made-in-Italy wood and furniture economy, as opposed to a weak domestic market dominated by slow growth, low confidence and low spending capacity for consumers. This is the picture found in the preliminary 2011 figures processed and published in December by Centro studi Cosmit-Federlegnoarredo, with details about all industry segments.

 

In the entire wood-furniture industry in 2011, turnover decreased to 32.4 billion Euros (-3.3% from 2010), after a temporary recovery of losses recorded in the 2008-2009 period. If final figures confirm this situation, the industry will be below its 2009 levels, which was the lowest point in terms of economic results; in this case, the strongest impact is generated by domestic consumption, down by 5 percent (versus +3 percent in 2010), while export keeps growing by 5.1 percent (it was 6.4 percent last year); this results into a total value of revenues from foreign markets of 12.2 billion Euros and a trade balance above 7 billion Euros. Temporary Italian furniture export figures, including bedrooms, beds, children bedrooms, living rooms, chairs and miscellaneous furniture, in the January-August 2011 period, processed by Centro Studi Cosmit-Federlegnoarredo from the Istat ranking of 50 countries, have France at number one of the top-ten list (+10.9% vs. the previous year), followed by Germany (+8.6%), Russia (+13.6%), United Kingdom (0%), United States (+1.4%), Switzerland (+9.7%), Spain (+8.2%), Belgium (+4.6%), Ukraine (+25.1%) and China (+57.8%). The total value of the top-ten countries is 2.2 billion Euros (+9.2%), out of a total 50-country value of 3.3 billion Euros (+7.7%). Among the top-forties, outstanding performance was achieved by India (+36.7%), Mexico (+43%), Kuwait (+45.2%) and Azerbaijan (+79%). In the same period, Italian imports mainly came from China (-4.7%), Germany (+12.8%), Poland (+15.4%), Romania (-0.3%), France (+18.3%), Austria (-8.5%), Vietnam (-1.7%), Slovenia (+11.9%), Indonesia (-21.7%) and Sweden (+6.7%). Noteworthy figures were recorded for imports from Turkey (+44%), Portugal (+57.8%), Hungary (+113.1%), Albania (+57.5%), Latvia (+96.8%), Serbia (+52.6%), Singapore (+80.5%) and Moldova (+81.1%). The total value for 50 countries is 843.2 million Euros (+3.3%).

 

In 2011, the crisis gave another blow to the furniture system, which achieved a 20.3 billion Euro turnover down by 4.9 percent versus a 1.8 percent rally last year. Domestic consumption keeps decreasing (-9.8%), compensating the 1 billion Euro increase of export compared to post-crisis 2009 levels, while export keeps growing, touching 10.5 billion Euros (+5% compared to 2010, it was +5.4% the previous year). The 500+ million Euro difference in export contributed to the good result of the trade balance (+5.3%). The percent variation of imports changed from +18 percent in 2010 to +4.1 percent last year versus 2010. The Italian export value ranking of the furniture system in the January-August 2011 period by destination country (with a total of 6.4 billion Euros, + 7.5%) is guided by France (+7.3%), Germany (+14.7%), United Kingdom (+0.3%), Russia (+14.8%), United States (+1.8%), Switzerland (+14.7%), Spain (+0.2%), Belgium (7.1%), Austria (9%) and The Netherlands (+3.5%), accounting for 4.2 billion Euros totally (+8% versus the same period of 2010). Among the top-forty countries, Kuwait (+55.8%) and Azerbaijan (+59.9%) emerged; at number fifty, Brazil (+30.4%). On the import side, out of a total value just below 2 billion Euros (+7.5%), the ranking is headed by China (+0.7%), followed by Germany (+13.8%), Poland (+27.6%), Romania (+8.5%), France (+13.6%), Austria (-5.4%), Spain (+28.2%), India (+1.9%), Belgium (+14.1%) and the Netherlands (+12.1%). Import increased also from Egypt (+37.7%), Bulgaria (+52.2%), Portugal (+48.9%), Russia (+33%), Tunisia (+89.9%), South Korea (+63.6%), Estonia (+78.5%), Hong Kong (+96.6%) and Latvia (+98.2%).

 

The macro system wood-constructions-furniture differs from the other two sectors; it represent the entire supply chain, including semifinished materials and wood construction products. Turnover, equal to 12.1 billion Euros in 2011, decreased by 0.5 percent (versus 2.3% in 2010); also export (+5.9% vs. +13% in the previous year) and import (from 21.2% in 2010 to 1.5% in 2011) slowed down, while domestic consumption stopped at +0.7 percent, as evidence of the difficult situation despite the positive trend of wood constructions. According to temporary figures in the January-August 2011, out of a total value of 1.27 billion Euros (+19% over 2010), the top-ten destination countries for Italian export are headed by Germany (+12.6%), with outstanding results recorded by Belgium (+794%), Turkey (+55,4%) and the United States (+54.5%); strong expansion also for Hungary (+102.5%), Estonia (+205.3%), Iraq (+145.6%), Azerbaijan (+94%) and Indonesia (+125.7%). A negative trend was recorded by Greece (-40.9%), Egypt (-39.1%) and South Korea (-42.4%). Talking about import (total value of 1.43 billion Euros, +1.9% over 2010), Austria is the top importer to Italy, despite a slight decrease by 1.5 percent, followed by Germany (-3.2%) and China (+12.4%); increasing flows came from Chile (+28.6%), Sweden (+32.7%), Lithuania (+44.5%), Estonia (+36.8%), Luxembourg (+42.8%), Canada (+53.9%) and Belarus (+46.8%).

 

Before a still critical scenario, industry companies keep asking for effective measures by the institutions to bring national economy back on favorable tracks, especially for domestic consumption of wood products and furniture, through suitable actions on the fiscal system, support to globalization and development of the construction industry as a key sector to pull the recovery of the entire supply chain.

The confirmation of 55 percent fiscal incentives for renovation works is feeding oxygen into the window and building envelope business, and the recent modification of paragraph 2 of article 52 of Italian law No. 380/2001 (Unified document for the construction industry), allowing wood constructions higher than four stories, canceling the request of authorization to the upper council of public works, seem to pave the way to the wood industry, but there are still a few hot topics on the table.

Stricter tax regulations that, at the same time, will not punish virtuous companies, based on an overall tax reform, also leveraging incentives on individual and company income taxes to the benefit of young workers under 35 and women as a tool against evasion, appear – according to FederlegnoArredo – an essential tool for economic expansion initiatives, despite the open issue of delayed payments by the public administration to companies. “55 percent deductions must be the starting point to re-launch the building activity that drives the entire furniture and interior decoration industry – says Roberto Snaidero, president of FederlegnoArredo -. The issue of credit access for young people is just as relevant:in this respect, FederlegnoArredo offers a warranty fund for young people to cover full loans for new houses and the purchase of the initial set of furniture”.

Another critical issue is internationalization, still inadequately supported by Italy’s industrial policy, as witnessed by the recent attempt to cancel the Italian Institute for Foreign Trade (ICE), then restored by Mr. Monti’s new government. This adds to the impact of Basel 3 regulations concerning the credit policy of banks and the enduring credit crunch on companies. In this respect, “we have to go beyond the emergency approach and give a strong signal about the focus of investments in our country and the industry priorities. Supporting international promotion is essential to spur export and expand our economy as a result,” explains the Fla president, who asked again for targeted measures to revive domestic demand, for instance an initiative for the renovation of furniture in offices and working environments.

The third element to be tackled with determination is the relaunch of constructions. In this case, in an industry like wood constructions suffering from the impact of growing costs for raw materials and primary processing executed abroad, the difference can be made by an effective policy for forest management and wood cultivation. The potential in this area is unexplored and unexploited, according to Snaidero: “Italy is a major importer of wood, as a result of growing consumption of this raw material as well as of the lack of a policy to optimize the use of national forest resources.FederlegnoArredo submitted a project for the wood industry aimed at revitalizing our forests and managing a sector that has a direct impact on economy, environment and territory”. The proposals are tangible: “Increasing the extension of agricultural areas dedicated to poplar cultivations to produce raw material for industrial use and biomass for energy purposes is a strategy that strengthens the growth of the industry, especially if you reduce from 24 to 12 months the current period of biological rest for poplar plantations”.