Furniture production in Brazil increased in March but the rate of growth was lower than that observed for the same month in the past two years. Analysis of production data suggests that average utilisation of installed capacity in the furniture manufacturing sector during March was lower than that in either March 2011 or 2012.

Of the various constraints facing the furniture sector the rising costs of raw materials and a heavy tax burden are often cited. Prices of raw materials for the industry rose significantly in the first quarter of 2013 according to the National Confederation of Industry.

The weaker than expected performance of the furniture sector over the past few months, coupled with rising production costs, affected the financial standing of companies. Adding to the woes of the sector is the difficulty faced in securing competitive credit services.

Results of FIMMA Brazil 2013 Exceed Expectations
The 2013 International Machinery, Raw Material and Accessories fair - FIMMA Brazil - was declared a success. Some 653 exhibitors and 45,443 visitors from 41 countries attended the fair. For more see
http://www.fimma.com.br/en/

This was the eleventh fair and the largest for the furniture sector in Latin America and fifth largest worldwide. Estimates put the level of business transacted at US$ 439 million, about 9% higher than during FIMMA 2011.

The fair provided companies with access to development opportunities, facilitated access to new technological developments and showcased cutting-edge initiatives from around the world. For companies interested in expanding their international markets, the FIMMA “Buyer Project”, a buyer meet seller initiative, provided the opportunity for companies to forge business partnerships. It is estimated that the “Buyer Project” generated US$7.15 million in business from the numerous business meetings that were held involving 20 foreign buyers from eight countries and 72 exhibitors.

Tropical plywood exports rise in otherwise quiet market
In March 2013, wood products exports (except pulp and paper) fell 9.8% compared to values in March 2012, from US$221.2 million to US$199.5 million. Pine sawnwood exports also fell, reversing a recent
upward trend. March exports of pine sawnwood declined 14.2% in value compared to March 2012, from US$14.1 million to US$12.1 million. In terms of volume, exports fell 14.3%, from 63,800 cu.m to 54,700 cu.m over the same period.

Exports of tropical sawnwood fell sharply by 20.4% in volume, from 40,100 cu.m in March 2012 to 31,900 cu.m in March 2013. In terms of value the decline was even more significant falling almost 30% from US$22.3 million in March 2012 to US$15.7 million in March this year.

Pine plywood exports also fell dropping 4.9% in value from US$ 34.5 million to US$ 32.8 million. The volume of exports fell marginally (minus 3.6%) from 89,700 cu.m to 86,500 cu.m. (March 2012 – March 2013).

In a surprising reversal of the downward trend for other woood product exports, in March this year tropical plywood exports increased 21.6%, from 3,700 cu.m in March 2012 to 4,500 cu.m in March 2013. However, average prices dropped as the total value of exports in March 2013 were almost the same as in March 2012, US$ 2.7 million.

Brazil‟s exports of wooden furniture dropped from US$38.2 million in March 2012 to US$35.9 million in March 2013, a 6.0% decline. Challenging the Chinese market for luxury furniture According to research of the global luxury furniture market undertaken by the Federation of Industries of Santa Catarina State, opportunities could be generated for the export of Brazilian furniture to China.

It was determined in the Federation study that demand in the Chinese market for high class western-style furniture could be an opportunity for Brazil. It was determined that consumers in this segment of the market pay high prices for quality western designs.

The Federation study suggests that if Brazilian furniture manufacturers want to capture a share of the up-market furniture market in China then attention must be placed on developing brand image. The Chinese market for top-end furniture is concentrated in Shanghai and Beijing and is currently dominated by Italian and German brands, according to the study.

Remarkable data on per capita consumption of furniture in China is also reported in the study. Apparently, annual per capita consumption of furniture in China is higher than the world average. The Federation report says while the world average is US$50.00 per person per year, in China the average over recent years was US$ 75.00 per person per year.

The latest data available for Brazilian exports to China are for 2011 when five Brazilian companies exported just US$62,000, almost nothing compared to the US$91 million from Italy and the US$89 million from Germany.

Furniture exporters face difficult trading conditions in international markets
First quarter 2013 data shows that the Brazilian furniture sector began the year on an encouraging note. Demand in the domestic market was good however; the good news was tempered by difficult trading conditions in the international markets.

In January 2013, according to the National Confederation of Industry (CNI), the furniture sector in Brazil ranked fifth among 16 industrial sectors in terms of growth. Growth in the furniture sector was reported as 11.7% in January, a figure that is higher than the average for all sectors examined.

Brazilian furniture exports have been disappointing
During the period from March 2012 to February 2013, the furniture industry exported approximately US$ 457 million, 11% lower than that of recorded over the same period one year earlier. The Rio Grande do Sul furniture cluster accounted for a 26.6% share of Brazil's international furniture sales, (US$11,858,942). However, overall national data indicate stagnation in furniture exports in recent years.

On the other hand Brazilian furniture imports have continued to grow. From January to December 2012, imports totaled US$ 27 million, approximately 79% higher than imports in 2011 (US$17 million). In January and February 2013, furniture imports continued the upward trend and the average monthly growth was 1.9% over the past 12 months.

Central Bank rate cut, first since July 2011
According to the Brazilian Institute of Geography and Statistics (IBGE), Brazil‟s consumer price index (IPCA) touched 0.47% in March, which is below the 0.60% rate recorded in February. In March the inflation rate was 0.21% and the accumulated rate of inflation over the past 12 months was 6.59%, a level exceeding the upper limit target set by the Brazilian Central Bank (BCB).

In the foreign exchange markets the average exchange rate  to the US dollar in March was BRL 1.98/US$ compared to BRL1.79/US$ in March 2012 indicating a slight depreciation of the Brazilian currency against the dollar.

The Monetary Policy Committee of the BCB raised the prime interest rate (Selic) by 0.25 percentage point at its meeting in April. This was the first increase in rates since July 2011. Interest rates now stand at the equivalent of 7.5% per year.


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