Executive Summary
After several months of growth in new orders, our recent survey of residential furniture manufacturers and distributors indicated a bit slower growth in August. The increase in orders in August was 1 percent following increases of 11 percent in July, 6 percent in June and 8 percent in May. This August increase, though small, marked the 13th straight month of increased orders when compared to the same month a year ago.
Year-to-date, new orders remained 6 percent ahead of the same period a year ago. For the first 8 months of 2016, new orders were up 1 percent over the first 8 months of 2015. Approximately 70 percent of the participants have reported increased orders year-to-date.
Shipments for August 2017 were up 5 percent over August 2016 and up 23 percent over July 2017. The large increase over July is due to the fact that many of the participants take a week off for the July 4th holiday. Year-to-date, shipments remained 5 percent ahead of the same period a year ago. Approximately 75 percent of the participants have reported increased shipments year-to-date.
Backlogs fell 5 percent from July as the dollar amount of shipments exceeded new orders in August. Backlogs were 6 percent ahead of August 2016, down from 8 percent reported in the July to July comparison.
Receivable levels were 7 percent higher than August 2016, a bit out of line with the increase in shipments, but this is likely a timing issue considering the increases in August over July shipments. We expect these levels to come back in line next month.
Inventories were up 3 percent over August 2016 and flat compared to July levels. Overall, inventories appear in line with the increase in orders and shipments.
Factory and warehouse payrolls and the number of employees seem in line with payrolls only up 2 percent in the August to August comparison, as well as year-to-date. The number of factory and warehouse employees was actually down 3 percent, the same as last month.
National
Housing
After three straight monthly declines, existing-home sales rose 0.7 percent in September 1.5 percent below a year ago. The results for September were primarily blamed on lack of inventories and fast rising prices.
Regionally, sales in the Northeast were unchanged from August but down 1.4 percent from a year ago. Midwest sales were up 1.6 percent but down 1.5 percent from a year ago. Sales in the South were down 0.9 percent and were 2.3 percent lower than a year ago. Sales in the West were up 3.3 percent and even with a year ago.
The report indicated that sales would have been somewhat stronger if not for the fact that parts of Texas and South Florida – hit by hurricanes Harvey and Irma – saw temporary but notable declines.
New single-family house sales were stronger with September sales up 18.9 percent over August and 17 percent ahead of a year ago. Sales were up in the Northeast, South and West but fell 2.7 percent in the Midwest compared to September 2016 sales.
Privately owned housing starts in September were 4.7 percent below August but were 6.1 percent ahead of September 2016. Single-family starts were up nicely in all regions except the South, which was off 5.6 percent compared to September 2016.
Other
The advance report for September retail and food services indicated an increase of 1.6 percent over August and up 4.4 percent over September 2016. Retail trade sales were up 1.7 percent over August and up 4.7 percent over September 2016.
According to this report, sales at furniture and home furnishings stores were down slightly from August but were up 1.7 percent over September 2016. Sales at these stores were up 3.8 percent year-to-date through September.
The Consumer Price Index for all urban consumers rose 0.5 percent in September and was up 2.2 percent over the last twelve months for all items. The index for all items less food and energy increased only 0.1 percent. The twelve month change in the index for all items less food and energy was at 1.7 percent. The gasoline index was up substantially.
The unemployment rate dropped to 4.2 percent while total nonfarm payroll employment was little changed in September. The number of unemployed persons dropped 331,000.
The advance estimate for GDP indicated a 3.0 percent increase in the third quarter following a 3.1 percent increase in the second quarter.
The Conference Board Leading Economic Index dropped 0.2 percent in September. The decline, the first one in the last twelve months, was attributed to the effects of the hurricanes.
Consumer Confidence
The Conference Board Consumer Confidence Index, which had improved slightly in September, increased in October to 125.9 up from 120.6 in September with both the Present Situation and Expectation Index increasing.
The Director of Economic Indicators said that consumer confidence increased to the highest level in almost 17 years (December 2000 at 128.6).
The Michigan Survey of Consumers dropped slightly in October but remained at the highest level since the start of 2004.
Thoughts
We thought we had a very good High Point Furniture Market. Of course, for most, it takes several weeks to determine exactly how good it was depending on orders, but overall the mood seemed very good and most exhibitors and retailers we talked to seemed happy with product.
We hear from many that retail had seemed to soften somewhat in September and early October. It was hard to tell how much impact the hurricanes and fires had on these remarks, as it was not only Houston and southern and western Florida that were hit, but also surrounding areas.
With the latest consumer confidence report so positive, it seems that business should be good. And in fact, at least at the manufacturer/distributor level, it has certainly been decent at least through August. Our report showing 13 months of increased orders seemed to show that.
We should begin to feel some of the effects of the recovery from the hurricanes and fires in the next few months. Overall, most seem to feel that the economy should be good on into 2018.
