Executive Summary

The results of our latest survey of residential furniture manufacturers and distributors was a little like the results last month—a bit surprising based on conversations at and since the High Point Market. New orders were up 8 percent in May 2017 versus May 2016, following the 7 percent increase reported last month. New orders were up for some 58 percent of the participants up from 47 percent reporting increases last month.

Year-to-date, new orders were up 7 percent over last year, up from a 6 percent increase reported last month. Approximately 60 percent of the participants reported increased year-to-date orders.

Backlogs were up 3 percent from April and remained 11 percent ahead of last May.

Receivable and inventory levels appear in good shape considering current business levels. Receivables were up 5 percent with shipments up 7 percent for the month versus last year. Inventories were up only 1 percent, so very much in line.

Factory and warehouse payrolls and employees were also in line, with the number of factory and warehouse employees actually down 2 percent from last year. Payrolls were up 4 percent for the month and 1 percent for the year-to-date, so very much in line. Pure importers can have some effect on payroll numbers.

National

Housing

Existing-home sales decreased slightly in June for both single-family and overall. Yet sales remained 0.7 percent ahead of June 2016. June sales were the second lowest in 2017. The results were primarily blamed on lack of inventory and the continued increases in prices. Sales were up in the Midwest but down in all three other regions.

New home sales were up compared to last June in all regions except the Midwest.

Housing starts were up 8.3 percent over May and up 2.1 percent from June 2016. Single-family starts were up 10.3 from June 2016 and were up in all regions except the Northeast, where they were down 19.2 percent.

 GDP

The first estimate of GDP for the second quarter noted an increase of 2.6 percent versus 1.2 percent reported for the first quarter. The increase came from positive contributions from personal consumption expenditures, nonresidential fixed investment, exports and federal government expenditures.

Other

Retail and food services sales overall were down 0.2 percent in June from May, but were up 2.8 percent over June 2016. Retail trade sales were down 0.1 percent from May and up 3.0 percent from June 2016. Sales at furniture and home furnishings stores were basically flat comparing June and May sales but were up 2.5 percent over June 2016. Year-to-date, sales at these stores were up 3.2 percent.

The Consumer Price Index was little changed in June. Over the last 12 months, the all items index rose 1.6 percent. The energy index dropped in June offsetting an increase in the all items less food and energy.

The employment picture continued to show improvements, adding 222,000 jobs in June. The unemployment rate remained at 4.4 percent.

The Conference Board Leading Economic Index increased 0.6 percent following 0.2 percent increases reported in May and April. The report noted that the results pointed to continued growth in the U.S. economy and possibly an improvement in the overall GDP in the second half of the year.

Consumer Confidence

After a small decline in the Consumer Confidence Index in June, the index improved in July. The Index increased to 121.1 from 117.3 in June. Lynn Franco, Director of Economic Indicators at the Conference Board stated, “Consumers’ assessment of current conditions remained at a 16-year high (July 2001 at 151.3) and their expectations for the short term outlook improved somewhat after cooling last month.

The report indicated that consumers overall felt better about business conditions and availability of jobs. Although they were not positive about their income prospects.

Thoughts

The increase in orders in June 2017 compared to June 2016 was again very positive and with orders up for 58 percent of the participants versus 47 percent last month, as the results were much more wide spread. We noted last month that we had heard that business had slowed since Memorial Day so we were a bit surprised that the results for manufacturers and distributors were as positive as they were.

With consumer confidence at its 16-year high, according to the Conference Board Report, the stock market is doing well, housing overall is still doing well in spite of ups and downs, inflation is mostly in check, gas prices are relatively low, employment news is fairly good and interest rates are still at historic low levels, so why is retail not doing better. It’s not just furniture sales. Year-to-date, sales at clothing and clothing accessory stores were even with last year. Sporting goods, hobby, book and music stores were down 4.7 percent. Department stores were down 4.2 percent. Electronic and appliance stores were down 1.1 percent. So the increase in furniture and home furnishings stores of 3.2 percent was not all bad.

Overall, retail was up 4.0 percent, auto and motor vehicle sales were up 4.5 percent. Non store retailers were up 10.8 percent so it is clear that some of the negative groups are being affected by online sales. Yet retail in general just does not seem like it is good as it should be.

The only thing we can figure is the negative (for the most part) media news just keeps consumers from spending. Whether its “Obamacare”, tax cuts, Russia, Isis and a number of other things, it just does not seem like it is as good as it should be.

Yet according to our annual operating statistics survey that we recently completed, profitability was up for the participants in our survey. So life is not all bad. We have had several good or at least decent growth several years in a row. Maybe we are just expecting too much.