According to our latest survey of residential furniture manufacturers and distributors, new orders in October 2018 increased 7% over new orders reported in October 2017. While last month’s 9% increase compared to a 10% decrease in the previous year, the October results compared to an 8% increase reported for October 2017 versus October 2016. The 7% increase for October followed increases of 9% in the last two months as well as 5% increases in the previous three months.
Year to date, new orders remained 6% ahead of the same period a year ago. Some 68% of the participants have reported increased orders year to date.
Shipments in October were 3% higher than October 2017 shipments. Shipments remain 3% ahead of last year through October. Some 66% of the participants reported increased shipments year to date.
Backlogs increased 5% again in October, the same increase as reported in September. Backlogs were 14% ahead of October 2017, the same level as reported last month. With orders exceeding shipments through the 10-month period and backlogs this high, we would expect shipments to make up some ground in the last two months of the year.
Receivable levels increased 6%, which compared to the 3% increase in shipments seemed a little high. In addition, inventory levels increased 9% over October 2017. Again, this increase appeared a little high compared to current order rates. We will continue to monitor both receivables and inventory levels though we believe that the increases could be a result of timing differences.
The number of factory and warehouse employees as well as payrolls continue to be in line with expectations based on current business levels.
The Conference Board’s Consumer Confidence Index decreased in December, following a modest decline in November. The Present Situation Index declined slightly while the Expectations Index fell more dramatically (from 112.3 last month to 99.1 this month). The report indicated that expectations regarding job prospects and business conditions weakened but still suggest the economy will continue to expand at a solid pace in the short-term.
Once again, the University of Michigan report was slightly different. Their Index of Consumer Sentiment increased slightly with the Current Economic Conditions Index increasing while the Index of Expectations declined. The report did state that “consumer confidence remained in December at the same record favorable levels as it has throughout the year.”
Total existing-home sales increased again in November, according to the National Association of Realtors®. Three of the four major regions reported gains in sales activity in November. Single-family homes sales were up in November as well, but were still 6.7% below November 2017. Single-family home sales increased in all regions except for the West where they declined 6.3% from October and were 15.4% below a year ago. The report indicated that rising inventory levels are taming the home price appreciation.
New single-family house sales were unavailable at press time due to government shut down.
Privately-owned housing starts increased 3% above the revised October estimate but were 3.6% below the November 2017 rate. Single-family starts were down 13.1% from November 2017. Single-family starts were down in all regions of the country except for the Northeast where they increased 8.1%.
The “third” estimate from the Bureau of Economic Analysis reported that real gross domestic product increased at an annual rate of 3.4% in the third quarter of 2018. In the second quarter, real GDP increased 4.2%. The third estimate was down slightly from the second estimate of 3.5% with the deceleration reflecting a downturn in exports, non-residential fixed investment and personal consumption expenditures.
The Conference Board’s Leading Economic Index (LEI) for the U.S. increased 0.2% in November following a 0.3% decline in October and a 0.6% increase in September. Ataman Ozyildirim, Director of Economic Research and Global Research Chair at the Conference Board said, “Despite the recent volatility in stock prices, the strengths among the leading indicators have been widespread. Solid GDP growth at about 2.8% should continue in early 2019, but the leading economic indicators suggest economy is likely to moderate further in the second half of 2019.”
The advance estimates for U.S. retail and food services sales for November indicated an increase of 0.2% from the previous month and 4.2% above November 2017. Total sales for the September 2018 to November 2018 period were up 4.3% from the same period a year ago. Sales at furniture and home furnishings stores were up 1.2% from October and up 1.7% from November 2017. Year to date, sales at these stores were up 4.1%.
The Consumer Price Index for all urban consumers was unchanged in November on an adjusted basis after rising 0.3% in October. Over the last 12 months, the all items index increased 2.2% before seasonal adjustment. This compared to a 2.5% increase reported in October. The energy index increased 3.1% for the 12 months ending November. The food index rose 1.4% over the last 12 months.
In recent conversations, we have heard that business has slowed somewhat, but our latest survey continued to show positive results. The last five months have produced nice increases in new orders. We would expect some slower growth based on these conversations in November and possibly December. Consumer confidence has remained at high levels in spite of the declines in the stock market. It appears that consumers are not paying as much attention to the market swings as they are other factors, such as the holiday season and good economic and job reports, etc.
Every time we think we have a feel for whether tariffs will increase or not, more news comes out to change the direction of our thinking. We wish we knew how better to advise so that people could make better plans, but we just don’t have a strong feeling which way the winds will blow these tariffs.
With all that said, most of what we read continues to believe that the first half of 2019 will continue with a strong economy, even if maybe not quite as strong as it has been. So, here’s our wishes to you for a very strong and prosperous new year. We hope you had a great holiday season and that 2019 is a great year for all of you.