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Furniture makers raise prices as their costs increase

by Emery P. Dalesio
| April 18, 2010 9:00 PM

RALEIGH, N.C. - Furniture companies are raising prices despite fears that higher costs could kill off a rebound just as recession-shocked shoppers appear willing to spend.

Furniture makers are blaming higher labor and material costs for producing in Asia as well as trans-Pacific shipping fees. Industry insiders expected more news of price hikes as buyers and producers gathered in High Point for the world's biggest furniture trade fair beginning Saturday.

"I'm aware of a lot of manufacturers that are considering price increases in this upcoming April market. They will announce a price increase and they will see if their major retailers are willing to take it, and if not they'll back off," said Bob George, president of Atlanta-based Impact Consulting Services Inc., which advises furniture manufacturers and retailers.

One big factor driving furniture prices is the rising cost of shipping from Asia to the United States.

Last month, the Federal Maritime Commission, whose mission includes protecting U.S. maritime commerce from unfair foreign trade practices, started investigating whether a surge in shipping fees could strangle the budding U.S. economic recovery. The average price of shipping a standard 40-foot container from Hong Kong to Los Angeles, for example, jumped 61 percent in the first week of April compared with the same time last year, according to data from London-based Drewry Shipping Consultants.

Another culprit is that more than two-thirds of the wood pieces sold in the U.S. are made abroad, and rising living standards in China and Vietnam are bidding up factory wages, said Rob Sligh, chairman of Sligh Furniture.

Those rising costs led the Michigan company to raise prices by an average of 2 percent this week, he said.

Furniture retailers are expected to pass along much of the manufacturers' price increases to customers rather than absorb them. Retailers saw their revenues drop nearly 10 percent last year, according to IBIS World Inc.

Higher prices could curb the furniture shopping plans of Robby King, who is moving with his partner into a duplex in midtown Atlanta at the end of the month.

"I really look around before I buy. I don't have the discretionary income that I wish I had, so there won't be a lot of impulse buying," said King, 32, an administrative assistant for a commercial real estate brokerage. "I would definitely notice and try to find something in my price range that I could deal with."

But some companies believe they can't wait any longer to pass along price hikes and are looking hopefully at signs that consumers are tired of waiting to redecorate.

After three years of declines, sales at furniture and home furnishings stores last month climbed 1.5 percent over February and by 4.2 percent from March 2009, the Commerce Department reported.

Producers including Ashley Furniture Industries, Sligh Furniture Co., and Portico Chair Co. are pushing ahead with price hikes matching or topping the inflation rate of at least 2 percent.

Furniture prices have almost universally stayed static or dropped since the recession began in December 2007 as the industry struggled to stay competitive.

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