Executive Summary
The results of our recent survey of residential furniture manufacturers and distributors continued the last few months of positive news. New orders in July were up 11 percent over July 2016, following increases of 6 percent in June, 8 percent in May and 7 percent in April. New orders increased over last year for 67 percent of our participants.
Year-to-date, new orders were 7 percent higher than the same period a year ago, up from 6 percent reported last month. Approximately 72 percent of the participants have reported increased orders for the year.
Shipments were also up nicely with a 10 percent increase over July 2016. The decline of 20 percent from June is normal with most of the companies taking a week off for the July 4th holiday. Increased shipments for the month were reported by 70 percent of the participants.
Year-to-date, shipments were up 5 percent. Approximately 70 percent of the participants reported increased shipments year-to-date.
Backlogs were up 8 percent over July 2016. This compared to a 6 percent increase reported last month.
Receivable levels were very much in line with both the increase in shipments over July 2016 and the decrease in shipments from June. Inventory levels also appeared to be very much in line with the increased levels of business, up only 3 percent over July 2016.
Also, the number of factory and warehouse employees and payrolls appear very much in line, though the number of factory employees were actually down 3 percent from last year. This could be a timing issue. Year-to-date, payrolls are up only 2 percent over last year in spite of the increased levels of orders and shipments.
National
Housing
Existing-home sales fell slightly in August from July but were still slightly ahead of August 2016. But this was the lowest increase over the prior year in 2017. Single-family sales were also down from July but still up 1.7 percent over August 2016.
Regionally, sales were down 14.5 percent from last year in the Northeast and 5.3 percent in the Midwest. Sales were up 5.0 percent in the West and 2.2 percent in the South.
Existing-home sales continued to be hampered by lack of inventories and increasing prices. Also, some of the decline could be the effects of Hurricane Harvey in Texas.
New house sales were also down from July and down 1.2 percent from August 2016. Sales were down in the South but up in all three of the other regions.
Single-family starts were up 17.1 percent with starts up in three regions but fell in the Midwest. Multifamily starts were off substantially causing overall starts to only be up 1.7 percent.
Other
Retail sales for August 2017 were down 0.2 percent from July but 3.2 percent above August 2016. Retail trade sales were down 0.3 percent from July 2017 but were up 3.3 percent from August 2016.
Sales at furniture and home furnishings stores in August were up 5.4 percent over August 2016. Year-to-date, sales at these stores were up 4.0 percent, the third highest growth of all categories other than nonstore retailers.
The Consumer Price Index rose 0.4 percent in August putting the all items index up 1.9 percent over the last 12 months. Indexes for gasoline and shelter accounted for most of the all items index increase.
The Conference Board Leading Economic Index increased again in August following previous month increases. The Director of Business Cycles and Growth Research for the Conference Board indicated that the gain is consistent with expected growth for the last half of the year, though some growth may be impacted by the hurricanes.
The employment gains in August were a little softer at 156,000 but were still decent. The unemployment rate held steady at 4.4 percent and the number of unemployed held at about 7.1 million.
The third estimate for GDP indicated a 3.1 percent increase. The increase was led by positive contributions from Personal Consumption Expenditures, nonresidential fixed investment, exports, federal government spending and private inventory investment.
Consumer Confidence
The Conference Board Consumer Confidence Index declined slightly in September after rising in August. Part of the decline was based on confidence decreases in Florida and Texas due to the hurricanes. Overall though, short-term outlooks remained positive with positive thoughts towards improved business conditions.
Thoughts
The solid growth in new orders since March continues to be good for many in the industry. With growth in orders year-to-date at 7 percent and increased orders for over 70 percent of the participants, things seem pretty good through July. Unfortunately, especially for those in the path of Hurricanes Harvey and Irma, things will definitely be choppy for a while. The recovery periods have definitely slowed business in Florida and Texas as well as lingering effects of major rains from Harvey. But as things settle down in all the hurricane impacted areas, we should see significant new orders.
In addition, in spite of those impacts, we continue to believe business will be pretty good throughout the rest of the year. The big question in the near future seems to be when the stock market bear wakes up and how long he/she will stay up as well as how bad a mood it might be in.
Continued prayers and thoughts for all of those affected by the hurricanes including the islands. We cannot imagine the difficulties they have gone through and are going through.
