Executive Summary

After several positive monthly results from our surveys of residential furniture manufacturers and distributors, the September survey showed a 10% drop in new orders. Even though we had heard that retail slowed some in September, that 10% drop surprised us. But, as we looked at the results, we looked back to last year and realized that September 2016 new orders were up 14% over September 2015. So comparing September 2017 to September 2015, new orders were up 3%, making the results not as bad as first glance.

For sure, 3% growth in 2 years is not all that exciting. That growth followed a 1% increase reported in August. So, clearly, things slowed late in the third quarter. For the month, some 62% of the participants reported decreased orders.

Year to date, the new order increase dropped from 6% reported last month to 4% through September. Approximately 61% of the participants reported increased orders year to date.

Shipments were up 4% for the month vs. September 2016 and remained up 4% year to date. Last year at this time, shipments were only up 1%. Approximately two-thirds of the participants are reporting increased shipments year to date.

Backlogs were about even with August, but were down 4% from September 2016.

Receivable levels got back in line after being a bit high last month. Inventories were 7% higher than September 2016, but were up only 1% over August. We will need to watch as business conditions change through the end of the year.

The number of factory and warehouse employees held steady from August and was down 2% from last September. Factory and warehouse payrolls remained 2% ahead of last year in September, as well as year to date.

National

Housing

Existing home sales increased 2% in October to the strongest pace since June 2017, but remained 0.9% below a year ago. Single family sales were up 2.1%, but were still 1% below a year ago. Once again the lack of inventory was blamed for the slowdown, as well as some effects of the hurricanes in Florida and Texas.

Regionally, existing home sales in October were up from September: 4.2% in the Northeast, 0.8% in the Midwest, 1.9% in the South and 2.4% in the West. Sales in the Midwest and South were down slightly from a year ago.

New houses sold were up 6.2% in October from September and up 18.7% above October 2016. New house sales were up from last year very nicely in all regions of the country.

Privately-owned housing starts were also up from September (13.7%), but were 2.9% below October 2016. Single family starts in October compared to October 2016 were down 13.2% in the Northeast and 5.6% in the West, but were up 10.4% in the Midwest and up 3% in the South.

Other

The advance report of estimated U.S. retail and food services sales for October 2017 indicates those numbers were up 0.2% from September and 4.6% from October 2016. Retail trade sales were up 0.2% from September and up 4.7% from October last year. Year to date, retail trade sales were up 4.0%.

Sales at furniture and home furnishings stores were up 4.4% over October 2016. Sales at these stores were up 3.9% year to date.

The Consumer Price Index for all urban consumers rose 0.1% in October as was up 2.0% over the last 12 months. The index for all items, less food and energy, increased 0.2% with a 1.8% increase over the last 12 months. The energy index increased 6.4% over the last 12 months with the food index rising 1.3%.

The unemployment rate dropped another 0.1% to 4.1% in October. Total non-farm employment rose by 261,000 in October. The number of unemployed persons decreased by 281,000.

After a drop in the Conference Board’s Leading Economic Index in September, the index increased sharply in October, rising 1.2%. The large increase was due to the effects of the hurricanes no longer affecting the index.

Consumer Confidence

The Conference Board Consumer Confidence Index improved again in November. The index improved to 129.5 (1985=100) with both the Present Situation and Expectation Indexes improving.

The index improved for the fifth straight week and is now at a 17-year high (November 2000 – 132.6).

The University of Michigan Survey of Consumers fell slightly in November from last month’s decade peak, but remained at high levels.

Thoughts

The results from September were somewhat expected as our recent conversations, including our Market visits, had indicated that business had softened. In addition, hurricanes impacted business and even slowed some Market traffic. We would expect to see some pick-up over the next few months as those affected in Texas and Florida and other areas begin to try to recover and rebuild.

With consumer confidence at highest levels in years, unemployment also at lowest in some time, and interest rates still low, all signs should be good for the industry. While some of the housing results are not as positive as we might want, we need to keep in mind that housing has been recovering since 2009. Eventually, as we see with our own businesses, it is hard to keep beating last year’s numbers over and over again. So we think both existing and new home sales are at good enough levels to keep furniture buying reasonably strong.

While the residential furniture business overall is pretty good, as always we have some winners and some not doing as well. Obviously all models are not the same, whether in product or customer base. Each of these continually change. But, hopefully, business will continue to pick up for all.

We hope you had a happy Thanksgiving. We all have lots to be thankful for, and since we won’t write again before the end of December, happy holidays to all.