Furniture production in Russia grows following demand

The decrease in furniture production in Russia in the first months of 2023 was offset by an increase in the second quarter. As a result, according to the results of the first half of the year, the industry showed growth both in physical terms and in money terms. This was facilitated by the recovered demand against the background of the commissioning of new housing and the growth of purchases from government agencies. In terms of growth in producers’ incomes, it lags behind due to the continued decline in prices at the beginning of the year, however, against the background of the devaluation of the ruble, the trend may change due to a significant volume of imported components, experts say.

As follows from the data of the Association of Furniture and Woodworking Industries (AMDPR) available to Kommersant, in January-June, the volume of furniture production in Russia in physical terms increased by 8.6%, to 26.8 million units. The most notable growth was in the production of kitchen furniture (by 15%), metal beds (by 44%) and hallway items (by 26%). Thus, the trend in the market has fundamentally changed: in January-February, the volume of furniture output fell by almost 10% due to a decrease in buyer activity (see Kommersant on April 10).

Now demand has begun to recover, which, according to Mikhail Burmistrov, General Director of Infoline-Analytics, is due, among other things, to an increase in the commissioning of new housing. According to the results of the first half of the year, new buildings with a total area of ​​21.7 million square meters were commissioned throughout the country. m, up 10% year on year. In addition, government agencies are increasing spending on furniture purchases, which, according to Kontur.Torgov, spent 49% more funds for these purposes in five months than in the same period a year ago.

Angstrem Executive Director Vadim Chernushkin notes an increase in the number of orders in the manufacturer’s partner network in July by more than 30% year-on-year. At the First Furniture Factory, according to its CEO Alexander Shestakov, sales of kitchens increased by 11.5% in six months, and the average bill – by almost 20%. At divan.ru, since the beginning of the year, production has increased by 41% year-on-year in physical terms, and by 23% in monetary terms, notes Evgeny Romanov, commercial director of the company. Hoff notes an increase of 14-31% in sales of kitchens, bedrooms, children’s and upholstered furniture.

The decrease in imports affects the growth in sales of Russian manufacturers of the middle and premium segments, says Sergey Shikhov, head of Mr.Doors. According to AMDPR, the share of foreign furniture in the market has fallen to 25% from 41% in 2022.

According to the association’s estimates, in monetary terms, the volume of furniture production in January-June also increased, but more slowly than in physical terms, by 4.7% year-on-year, to 179.5 billion rubles. Mr. Shestakov explains that “the cost of furniture from Russian manufacturers has not increased, and in some cases even decreased.” Indeed, in the first quarter, selling prices for products decreased by 7–15%, to the level of the beginning of 2022 (see Kommersant dated May 18). The cost of furniture was affected by the reduction in the cost of plywood, chipboard and fiberboard, whose manufacturers, after the introduction of Western restrictions in 2022, lost key sales markets and still cannot fully compensate for the losses (see Kommersant on August 11).

However, against the backdrop of a sharp depreciation of the ruble (see page 1), the cost of furniture production will grow, Vadim Chernushkin believes. According to him, the devaluation has already led to a rise in the price of imported components and equipment, on which the industry is highly dependent, and logistics costs are also increasing.

The AMDPR adds that accessories, paints, fabrics and chemical components have to be imported from abroad, “of course, the depreciation of the ruble seriously affects purchases.” According to Sergey Shikhov, at the beginning of the year, the industry expected a general rise in prices by 10-15%, but “taking into account the dynamics of the currency strengthening against the ruble in recent days, these figures may turn out to be even higher.”

In anticipation of a possible increase in prices and rising inflation, many consumers may decide to spend part of the savings formed last year on home improvement, believes Mikhail Burmistrov. At the same time, notes Yevgeny Romanov, after a further increase in the Central Bank of the refinancing rate, which will affect the decline in Russian demand for mortgages, the volume of transactions in the housing market may fall. And this, in his opinion, will lead to a partial reduction in demand for furniture.

Alina Savitskaya, Anastasia Tikhomirova