Executive Summary

Our latest survey of residential furniture manufacturers and distributors produced somewhat unusual results. New orders increased 7 percent in April over April 2016. The unusual part was that only 47 percent of the participants posted increases in new orders. The 7 percent increase followed a 4 percent increase in March when 77 percent of the participants reported increased orders.

Several of the participants reported significant double digit increases in April. We wonder if some of those results may have been due to substantial new orders obtained at the High Point Market, while some exhibitors tend to not see those results as quickly as others (such as new collections versus custom order upholstery and other factors).

Year-to-date, new orders remained 6 percent ahead of the same period a year ago. Approximately 65 percent of the participants reported increased year-to-date orders, down from 77 percent reporting last month.

Shipments increased 2 percent over April 2016 and were down 18 percent from March 2017. We would attribute the 18 percent decline to three fewer normal work days in April plus the effects of any Easter shut downs.

Year-to-date, shipments remained 4 percent ahead of last year. Some 62 percent of the participants reported increased shipments year-to-date.

Backlogs were basically flat with March but up 11 percent over April 2016. This compared to an 8 percent increase reported last month.

Receivable levels were a bit high based on shipments but since this was the first month we have seen that, we think it may just be a timing issue. Inventories seemed very much in line as did the employment factors.

National

Housing

Existing-home sales came back a bit in May but low inventory levels continue to curb sales as well as push prices up. Median home prices reached a new peak in May. All regions except the Midwest reported increases in home sales, though all four regions were higher than May 2016.

New single-family houses sold were up 8.9 percent above May 2016 results. Sales were up in the South and West, flat in the Northeast and down in the Midwest. Single-family housing starts were down a bit from April but still up 8.5 percent from May 2016; rising 29.0 percent in the Midwest, 22.2 percent in the West, but down slightly in the Northeast and South.

Other

Retail sales fell slightly in May from April but were 3.8 percent ahead of May 2016. Sales at furniture and home furnishings stores were up 4.4 percent over May 2016 and up 3.4 percent year-to-date.

Consumer price index fell 0.1 percent in May on an adjusted basis. Over the last 12 months, the all items index increased 1.9 percent. The decrease in May related primarily to the energy (primarily gasoline) index. The all items less food and energy rose 0.1 percent.

Nonfarm employment rose 138,000 in May. The unemployment rate at 4.3 percent, and the number of unemployed persons, at 6.9 million, was little changed.

The Conference Board Leading Economic Index increased again in May following increases in April and March. The report noted that the results “suggest that the economy is likely to remain on, or perhaps moderately above, its long-term trend of about 2 percent growth for the remainder of the year.”

Consumer Confidence

The Conference Board Consumer Confidence Index increased slightly in June after a small decrease in May. The report indicated that “Consumers assessment of current conditions improved to a nearly 16 year high” though short-term expectations have eased somewhat. The director stated that “Overall, consumers anticipate the economy will continue expanding in the months ahead, but they do not foresee the pace of growth accelerating”.

Thoughts

As we stated above, the increase in orders for April was very good but the way we got there was a bit different. The drop in new orders for more than one-half of the participants was not a good sign. From what we have heard, business at retail has been tough since apparently a good Memorial Day. While we normally see some sluggishness in the summer months, one quote we heard just today was that, yes, it normally slows down at this time of the year but not this much (or something to that effect).

We continue to find it interesting that consumer confidence has remained good. We think that is likely due to a strong stock market, fairly low interest rates, good job outlooks, among other things. What we do not understand is why, with all those positive factors, furniture sales are not doing better than they are.

But we need to keep in mind that retail in general is not all that strong either. According to the government reports, furniture and home furnishings stores sales are in line with retail sales in general. Maybe if Washington could figure a way to try to get along instead of the negative news, we might have better results overall.

In the meantime, let’s hope as vacation money is spent this summer, maybe there can be some left to spread our way a little later this year.

We hope you have a fun and safe July 4th holiday. Happy Birthday U.S.A.