Executive Summary
New orders in January 2018 increased 2% over orders in January 2017, according to our latest survey of residential furniture manufacturers and distributors. These results followed a 9% decline in orders reported last month in the December 2017 to December 2016 comparison. (The December 2016 to December 2015 comparison showed an 11% increase so the 9% decline was not as bad as it may have seemed.) Orders were flat comparing January 2017 to January 2016. Some 55% of the participants reported increased orders in the January 2018 results.
Shipments in January 2018 were basically even with January 2017. The split between participants reporting increases or decreases was about even. With the dollar amount of orders exceeding the dollars shipped, backlogs increased 1% but were down 1% from January 2017.
Receivable levels were in line compared to January 2017, but did not decline as much as shipments when comparing to December. We believe that comparison is probably a timing issue. We will see how that issue plays out next month.
Inventories were 8% higher than last January and up 5% from December. Inventory levels appeared in line through November but have remained a bit high as orders and shipments fell off. We will need to watch those levels over the next few months until we see when business will pick back up.
The number of factory and warehouse employees remained flat compared to both January 2017 and December 2017. Factory and warehouse payrolls fell 8% from December but we believe that was probably due to the fact that December likely included vacation and holiday pay.
National
Consumer Confidence
The Conference Board Consumer Confidence Index decreased slightly in March. The Index dropped to 127.7 from 130.0 in February. The Present Situation Index decreased from 161.2 to 159.9 while the Expectations Index declined from 109.2 in February to 106.2 in March.
The report did indicate that overall expectations remain quite favorable and suggested further strong growth in the months ahead.
On the other hand, the University of Michigan Surveys of Consumers report said that consumer sentiment rose in early March to its highest level since 2004, up to 102.0 from 99.7 in February. This was led by large increases in current conditions to 122.8 from 114.9 while the Index of Consumer Expectations fell slightly from 90.0 to 88.6.
The Expectations Index fell primarily due to top third income households concerns over lower income expectations and inflation concerns. This data suggested that a “relative lull in consumption in the 1st quarter may persist for another quarter.”
Housing
After two months of declines, existing-home sales increased in February, in spite of low inventories and higher prices. There were nice gains in the South and West that offset losses in the Midwest and Northeast. Sales grew 3.0% for the month over January and were 1.1% higher than a year ago.
New single-family home sales fell slightly from January but were 0.5% ahead of last February. Sales were up in the Northeast, South and West but fell in the Midwest.
Housing starts fell in February 7.0% from January and were 4.0% below February 2017. Starts were up in the South and West but declined in the Northeast and Midwest, likely affected somewhat by weather.
Other
The Conference Board’s Leading Economic Index increased 0.6% in February after increasing 0.8% in January and 0.7% in December. The report stated “the LEI points to robust economic growth throughout 2018.”
The advance reports on retail and food services sales indicated a slight decline in February from January, but sales were up 4.0% from February 2017. Sales at furniture and home furnishings stores were up 3.3% over February 2017. Sales were up 4.9% for the first two months of the year compared to the same period a year ago.
The Consumer Price Index for all Urban Consumers (CPI-U) increased 0.2% in February after rising 0.5% in January. Over the last 12 months, the all items index rose 2.2%. Once again, much of the increase was attributed to the volatile energy index.
Non-farm employment increased by 313,000 in February, the unemployment rate remained at 4.1%.
Thoughts
The results for January orders and shipments were a bit more stable, but during the winter months, we continue to see weather playing a role in both manufacturer and distribution orders as well as retail. Many retailers in the winter months have had shopping days reduced by the weather.
Consumer confidence remains high though at a conference this week on the economic outlook for the U.S., it was noted that the high confidence levels has not resulted necessarily in higher consumer spending ‒ as we have seen in furniture sales.
Even with the high consumer confidence, the University of Michigan report cautioned that the “relative lull in consumption” may continue into the second quarter.
The results we are hearing continue to be mixed and we are sure that the unstable stock markets are not helping matters especially at the upper end.
Hopefully spring is finally about to get here as we think most people are more than ready for it. We hope that we can get a couple of good weeks in before the April Market so that people will feel better about what their needs may be when they get here.
Safe travels to High Point. We hope you all will come.
