Executive Summary
New orders in July 2018 were up 5% over July 2017, according to our recent survey of residential furniture manufacturers and distributors. The 5% increase was a good one considering July 2017 orders were 11% higher than July 2016. This July increase marked the third straight month that orders were up 5% over the same month a year ago. Orders were up for 57% of the participants.
Year to date, new orders remained 6% ahead of last year. For the seven months, orders were up for 68% of the participants. As we have discussed recently, the rising tide has not lifted all boats as the industry is so diverse in product categories and price ranges that not everyone grows at the same pace.
Shipments were up 6% over July 2017 when they were up 10% over July 2016. So again, a pretty good month. Shipments fell in July from June but that is normal due to most companies shutting down a week in July for the 4th of July holiday. Year to date, shipments were up 3% over the same period a year ago. Last year in July, year to date shipments were up 5% over the prior year.
Backlogs were flat with June but up 4% over July 2017.
Receivable levels fell back in line with a 5% increase over last year, in line with the 6% increase in shipments. Inventories were up 3% over June and 4% over July 2017. Both increases seemed to be in line with current business levels.
Factory and warehouse payrolls were up 3% for the month and 2% year to date. The decline from June was normal due to the vacation week.
National
Consumer Confidence
For the first time in a couple of months, both consumer confidence surveys moved in the same direction. The Conference Board Consumer Confidence Index increased again in September after a large increase in August. The September Index was at 138.4, up from 134.7 in August. The report indicated that the current level was approaching an 18-year high when the Index reached an all time high of 144.7. The assessment of current conditions was “extremely favorable” while the Expectations Index “surged” in September. Lynn Franco, Director of Economic Indicators at The Conference Board, said “These historically high confidence levels should continue to support healthy consumer spending, and should be welcome news for retailers as they begin gearing up for the holiday season.”
The University of Michigan Surveys of Consumers report indicated another increase in September reaching 100.8. The second highest level since 2004. The report noted widespread gains among all major socioeconomic subgroups. The increases came from favorable prospects for jobs and income. There were concerns among nearly one-third of the consumers about the negative impact of tariffs.
Housing
Existing-home sales remained steady in August after four straight months of declines. Total existing-home sales were even with July but down 1.5% from a year ago. Single-family home sales were also even with July but were down 1% from a year ago. Sales gains in the Northeast and Midwest were offset by a slight decline in the South and a 5.9% decline in the West for August to July comparisons.
New house sales were up 3.5% over July and up 12.7% over last August. Sales were up in all regions from last year except the Northeast.
Housing starts were 9.2% ahead of July and were 9.4% ahead of August 2017. Single-family starts were down 0.2% from August 2017. Starts were down in the Northeast and South but up in the West and flat in the Midwest.
Other
The third estimate for Gross Domestic Product was not available at the time of writing.
The Conference Board’s Leading Economic Index (LEI) for the U.S. increased 0.4% in August following a 0.7% increase in July and a 0.5% increase in June. Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board, said “The leading indicators are consistent with a solid growth scenario in the second half of 2018 and at this stage of a maturing business cycle in the U.S., it doesn’t get much better than this.”
The advance estimates for U.S. retail and food services sales for August 2018 indicated a 0.1% increase in sales over July and a 6.6% increase over August 2017. Sales for the June to August 2018 period were up 6.5% over the same period a year ago. Sales at furniture and home furnishings stores were up 3.54% over August 2017 and up 5.0% for the first eight months of the year.
The Consumer Price Index increased 0.2% in August, the same as in July. Over the last 12 months, the all items index rose 2.7% before seasonal adjustment. The indexes for shelter and energy were the main contributors to the increase.
Total nonfarm employment increased by 201,000 in August. The unemployment rate was unchanged at 3.9%.
Thoughts
The July results were again positive with new orders up 5% and shipments up 6% over July 2017. Year to date, orders remained ahead by 6% over last year. Shipments remained 3% ahead of last year. Some 68% of the participants reported an increase in new orders year to date. So, as we have noted before, not everyone is enjoying better business but at least many have.
When looking at most all the national economic news that we think that affects the industry, business should be pretty good. Consumer Confidence is the strongest it has been for years and we know that confidence is the key for buyers to purchase larger ticket items. But housing remains a bit sluggish due primarily to the lack of inventory as well as higher prices, so that is having some impact.
The looming tariff issues continue to be worrisome. Some folks do not think it is a big deal at the 10% levels, considering also the drop in the value of the currency, but others are not so sure.
Most we talk to and read believe that if the tariffs come into effect, the tariffs will be temporary, and people will just have to adjust for the time being. But should they be in effect long term and even higher, prices will have to go up. For people to say they will not accept any price increases, well that just doesn’t make sense. If you want a good supplier of any product, they have to make a reasonable profit, or they won’t be there. Hopefully, if it comes into effect, it will be temporary.
We hope you are all about to be ready for the High Point Market and hope to see many of you there.
