Executive Summary

According to our latest survey of residential furniture manufacturers and distributors, new orders in January were basically flat with January 2016 orders. Just over one-half of the participants reported increased orders. These results followed two good months of November and December 2016 when orders were up 8 and 11 percent, respectively.

Shipments were up 2 percent over January 2016 and down 19 percent from December. The December to January fall off is fairly normal. With shipments slightly exceeding orders, backlogs fell slightly from December but were even with January a year ago.

Receivable levels were up 3 percent from January 2016 with shipments up 2 percent, so these levels seem to be very much in line. Inventories were up 3 percent from December but down 3 percent from last January. So overall, inventories seem in line, but in most cases probably need to be watched.

Factory and warehouse employees were down 2 percent from last January down from a 1 percent decline reported last month, but were up 1 percent from December. Factory and warehouse payrolls were up 6 percent from last year, but the increase fell from a 9 percent increase reported last month.

Housing

Housing, for the most part remained strong. Existing-home sales slipped slightly, down 3.7 percent (single-family sales were off 3 percent), but were 5.4 percent ahead of February 2016, with single-family home sales up 5.8 percent over a year ago. Single-family home prices were up 7.6 percent over February 2016, as the low supply of affordable priced homes continues to drive up prices.

Compared to February 2016, sales were down 13.8 percent in the Northeast, 7.0 percent in the Midwest and 3.1 percent in the West. Sales were up 1.3 percent in the South.

New single-family sales were up 6.1 percent over January and 12.8 percent over February 2016, offsetting a bit of the existing home drop from January. Sales were up from last year 13.8 percent in the Northeast, 50.8 percent in the Midwest, 7.9 percent in the South and 6.8 percent in the West.

Housing starts in February were up 3 percent over January and up 6.2 percent over February 2016. Starts were up in all regions except for the West where they were down 1.5 percent from last year.

Other

Retail sales were up 0.1 percent from January and up 5.4 percent from February 2016. Sales at furniture and home furnishings stores were up 0.7 percent over January and up 4.9 percent over February 2016. For the two months, sales at these stores were up 2.1 percent.

The Consumer Price Index was up 0.1 percent in February and up 2.7 percent over the last 12 months. The energy index fell 1.0 percent offsetting other increases.

Nonfarm employment increased by 235,000 while the unemployment rate was little changed at 4.7 percent, down from 4.9 percent a year earlier. The number of unemployed persons at 7.5 million was little changed.

Consumer Confidence

The Conference Board’s Consumer Confidence Index increased in March after an increase in February. According to Lynn Franco, Director of Economic Indicators, the index increased to its highest level since December 2000. “Consumers’ assessment of current business and labor market conditions improved considerably. Consumers also expressed much greater optimism regarding the short-term outlook for business jobs and personal income prospects.” This should be good for the industry.

Thoughts

We have pretty much said it before, with housing, the stock market, inflation, employment and consumer confidence all positive, the industry probably should be doing better. While interest rates are rising, they are still at historical lows. So why are we not?

Part of the answer is that it is hard to keep going up. Our local United Way just raised another record amount, for the sixth straight year. I can tell you from my most recent experience, that is hard to do. So each year the industry has been growing since the recession and that just gets harder and harder every year.

And we believe that though consumers may feel good about prospects, that is different than spending their own money. All the politics at, in many cases, the federal and state level have people concerned. Will I have health, how much will it cost, what is the story on taxes? And on and on. People are just concerned. Hopefully, once we settle into a more normal place (assuming we ever do), we should see all the positives start to show better signs ahead.

As we have noted before, we continue to believe spending habits have also changed since the recession. We believe many are not yet convinced that it is ok to spend on nonessentials.

With that said, furniture is being sold. The strong consumer confidence, along with the other positives, should lead to a decent 2017.