During the past two decades, the Canadian market for residential furniture performed better than the American market for residential furniture, despite the fact that the US economy outperformed the Canadian economy in most years. Between 1995 and 2007, the American furniture market (at retail prices) grew by 82% but the Canadian market grew by 141%. In 2007, the gap has been further magnified due to the economic slowdown and of the US housing market. At the present time, the strength of the American economy is uncertain. GDP growth has been declining continuously from its peak in the 1st quarter of 2006 and growth this year will be only around the 1.9% mark. This is the lowest rate since 2003 (1.8%) and compares to 2.9% last year. While experts expect a modest GDP improvement next year, the rate is not likely to surpass 2.5%. Personal income growth is an important force driving furniture consumption. Income growth in the US stood at 6.6% last year, up from 5.9% the year before. However, in conjunction with less robust employment growth in 2007, personal income growth may slow down to about 6.2% this year and below the 5% mark in 2008. After eliminating the impact of inflation and taxes, the growth rate of real disposable income will be even less, only about 3.0% this year and 2.7% in 2008. Growth of American consumer spending stood at 3.1% last year. Due to sagging consumer confidence, it will lag behind the growth of personal income. While this year's growth may drop only moderately to about 2.8%, the decline in 2008 may be more pronounced and reach an anticipated level of 2.3%. The durable consumer goods market is subject to fluctuations. In 2006, American spending on durable consumer goods was 3.8% ahead of the previous year and is expected to continue at the same rate in 2007. However, the 2008 annual rate is likely to fall to 1.5%. Residential construction remained a strong sector of the American economy until the middle of 2006. Thereafter, the market went into a tail-spin. In value terms, last year showed a drop of 4.6% compared to 6.6% growth the previous year. The housing market remains oversupplied and is predicted to suffer another hefty decline of 15.7% this year and a further decline of about 8.7% in 2008. In volume terms, this translates to 2.07 million new housing units in 2005,1.81 million last year, an expected 1.42 million in 2007 and only 1.32 million next year. In line with growth of disposable income, furniture consumption in the US rose at a rate of 6.9% in 2006, up from 4.7% the year before. This year may experience a painful slowdown to an anticipated rate of only 2.2%. This would bring the market value to about US$86.4 billion this year compared to US$84.5 billion last year. Growth for 2008 may be at the same slow speed, lifting the market to about US$88.3 billion. Canada's economy was strong in 2006, progressing at a rate of 2.8%. Nevertheless, GDP growth has slowed in 2007, advancing at an estimated rate of 2.5%. Personal income rose at a healthy pace of 6.1% in 2006. In conjunction with the US slowdown, it decelerated to about 5.0% this year. In view of the promised income tax cuts by the government, growth is likely to stay at this pace in 2008. The Canadian residential housing market advanced by 2.1% on a value basis in 2006, down from 3.5% the year before. However, the market is saturated now and demand is waning. We predict a 1.6% growth rate this year and only 0.9% in 2008. Nevertheless, the Canadian residential construction industry will still show a modest positive growth. However in unit terms, residential housing starts in Canada are also declining. In 2006, Canadian housing units amounted to 228,000 in 2006,215,000 in 2007 and are expected to only reach 190,000 in 2008. Canadian consumer spending is an important positive force contributing to the economy's overall growth and rose at an annual rate of 4.0% during the past two years. Due to the slowing economy a growth rate of 3.9% is anticipated in 2007 and 3.2% in 2008. Expenditures for durable consumer goods (which includes furniture) are quite buoyant. Growth will likely come in at a healthy 7.9% this year up from 7.1% in 2006. However, as consumer confidence is declining, experts predict that durable consumer good sales to advance by only 3.7% next year and possibly as low as 3.0% in 2009. The Canadian furniture market (at retail prices) has been advancing continuously since the third quarter of 2002. Growth stood at 9.4% in 2006. A slowdown to 5.3% growth is expected in 2007 and 5.6% growth is expected in 2008. The size of the Canadian furniture market in 2006 stood at C$ 11,078 million (evaluated at retail prices). Experts anticipate that market valuation will reach approximately C$ 11,667 million this year and climb to C$ 12,324 million in 2008. Source: ITTO's TROPICAL TIMBER MARKET REPORT