Executive Summary

According to our latest survey of residential furniture manufacturers and distributors, new orders in August 2018 increased 9% over new orders reported in August 2017. Last year, August 2017 orders were up only 1% over August 2016 orders. The 9% increase in August followed three consecutive months of 5% increases reported. Approximately 70% of the participants reported increased orders in August.

Year to date, new orders remained 6% over the same period a year ago. August 2017 year to date orders were also 6% ahead of the same 2016 period so the comparisons are to pretty good numbers. Some 71% of the participants reported increased year to date orders.

Shipments in August increased 5% over August 2017 and were up 3% year to date. Last year through August, shipments were up 5% over the same period in 2016.

Backlogs in August fell 4% from July as shipments in dollars exceeded orders. Backlogs were 6% higher than August 2017 up from a 4% increase reported last month.

Receivable levels were up 7% over last year but that was not too far out of line with the 5% increase in shipments. Inventories were flat with July and up 4% from August 2017. So overall, pretty much in line with current conditions.

The number of factory and warehouse employees held steady with July and were down 2% from last year. Factory and warehouse payrolls were also in line with current business.

National

Consumer Confidence

While the two surveys were a bit different this month, both survey indexes remained at highs not experienced since the early 2000’s. The Conference Board Consumer Confidence Index® increased again in October topping out at 137.9 up from 135.3. Both the Present Situation and Expectations Indexes improved to levels not seen since September 2000. The report noted that all of the conditions in the report were in the positive.

The University of Michigan Surveys of Consumer Sentiment Index fell slightly from 100.1 to 98.6 but remained higher so far in 2018 than any prior year since 2000. The report indicated that the growth in real personal consumption can be expected to average 2.6% during late 2018 and into the first half of 2019, though increases in home and vehicle prices, rising interest rates and decreases in the pace of growth of inflation-adjusted incomes have dimmed prospects for home and vehicle sales.

Housing

Total existing-home sales fell 3.4% from August after remaining flat last month. Single-family home sales were also down and were 4% below a year ago September sales.

Regionally, sales were down in all regions except for the Midwest where they were even.

Sales of new single-family houses in September were 5.5% below the revised August estimate and 13.2% below the September 2017 estimate. Regionally, sales were down substantially in the Northeast and in the South and West. Sales were up slightly in the Midwest.

Privately-owned housing starts in September were 5.3% below the revised August estimate but were 3.7% above the September 2017 rate. Single-family starts were up in all regions of the country with the exception of a decrease of 25.3% in the Northeast.

Other

Real gross domestic product increased at an annual rate of 3.5% in the third quarter of 2018, according to the advance estimate by the Bureau of Economic Analysis. This followed a real GDP increase of 4.2% in the second quarter.

The Conference Board’s Leading Economic Index (LEI) for the U.S. increased 0.5% in September, following a 0.4% increase in August and a 0.7% increase in July. The Director and Global Research Chair at The Conference Board, Ataman Ozyildirim, said “Economic growth could exceed 3.5% in the second half of 2018, but unless the momentum in housing, orders and stock prices accelerates, that pace is unlikely to be sustained in 2019.

The advance estimates for U.S. retail and food services sales for September 2018, increased 0.1% from the previous month and 4.7% above September 2017. Sales for the July 2018 through September 2018 were at 5.9% from the same period a year ago. Sales at furniture and home furnishings stores were up 1.1% in September over August and up 4.3% over September 2017. Year to date, sales at these stores were up 4.6%.

The Consumer Price Index for all urban consumers increased 0.1% in September on a seasonally adjusted basis after rising 0.2% in August. Over the last 12 months, the all items index rose 2.3% before seasonal adjustment. The shelter index continued to rise and accounted for over one-half of the seasonally adjusted monthly increase in the all items index. The energy index declined 0.5% in September after rising in August.

The unemployment rate declined to 3.7% in September and total non-farm payroll employment increased by 134,000.

Thoughts

The August results of our survey were again very positive. The results have shown relatively steady growth throughout the last several months. While some conversations have discussed how business has slowed somewhat in the later part of the summer, the results of the survey have not shown that. It was also nice to see that such a large percentage of our participants enjoyed some nice increases.

We just finished what we would call a pretty good High Point Furniture Market. The attendance appeared to be down somewhat according to most folks we talked to. That, for the most part, was blamed on the hurricane issues that decided to roll through town and parts of the South leading up to and including Thursday at market. Much of the conversation at market related to the weather and tariffs. The consensus of the folks we talked to, seem to believe that the 10% would definitely stick at least in the near-term. And that the 25% tariff would probably come into effect at the first of the year.

As with what seems to happen most of the time in the industry, there is a lot of talk about who will have to do what, but for the most part, the industry finds a way to figure out how to deal with these kinds of issues. Most people we talk to privately agree that the industry could use some inflation in prices to begin with. We have said that for a long time. Unfortunately, we were not thinking caused by tariffs, but instead with better profits.

Hopefully, those in the path of both recent storms will be able to recover soon.