Executive Summary
After falling 10 percent in September 2017 compared to September 2016, new orders increased 8 percent over October 2016, according to our latest survey of residential furniture manufacturers and distributors. Remember that the 10 percent decline in September was a bit misleading as the September 2016 orders were up 14 percent over September 2015. The 8 percent increase followed the September decline but also followed increases of 1 percent in August, 11 percent in July and 6 percent in June.
With the High Point Market a week earlier in October this year versus last year, there could be some reason for part of the increase in orders. Approximately 76 percent of the participants reported increased orders in October. New orders were up 5 percent year to date with some 67 percent of the participants reporting increased orders.
Shipments also increased 8 percent over October 2016, following increases of 4 percent in September, 5 percent in August, and 10 percent in July, compared to the previous year. Shipments for October were up for 76 percent of the participants. Year to date, shipments were up 5 percent over the first 10 months of the year with some 69 percent of the participants reporting increases.
Backlogs in October increased 4 percent over September as the dollar amount of orders exceeded the dollar amounts of shipments. Compared to October 2016, backlogs were down 2 percent in October 2017.
Receivable levels increased 1.0 percent over October 2016, very much in line with shipments. Inventories were up 5 percent over October 2016 and down 2 percent from September. October levels seemed to get back in line with current business conditions.
Factory and warehouse employee numbers and payroll also seemed in line with payrolls up only 2 percent year to date. The number of employees was level in October 2016.
National
Consumer Confidence
The Conference Board Consumer Confidence Index decreased in December after small improvement in November. The index was at 122.1 down from 128.6 in November. The Present Situation Index increased to 156.6 from 154.9 but the Expectations Index declined from 111.0 last month to 99.1 in December. The November Index reached a 17-year high so the slight decline was not all bad.
Consumers reported a higher percent thinking business conditions are good but the jobs assessment fell slightly. Short term, the expectations for business declined as well as the jobs outlook. The short term outlook for income did increase slightly.
The University of Michigan Surveys of Consumers report was very similar to the Conference Boards. The overall index declined with the current conditions index improving ever so slightly while the expectations index declined.
It is important to note that even with the slight decrease, consumer confidence remains at very high levels, the highest since 2000. The University of Michigan report notes that current levels were only exceeded in the 1960’s and 1990’s.
Housing
Existing-home sales increased for the third straight month in November and reached the strongest pace in 11 years. All regions of the country except for the West had significant increase in sales. Single-family sales were up 3.2 percent over a year ago. Existing condo and co-op sales were up 7.5 percent over a year ago.
The level of first-time buyers was down with increases in cash and move-up buyers with larger down payments making up a good portion of the sales. The median price was up 5.8 percent from November 2016, marking the 69th straight month of year-over-year gains.
New house sales were up 26.6 percent over November 2016 sales. Sales of these houses were up 53.3 percent in the Northeast, 32.5 percent in the South and 22.8 percent in the West, while sales were flat in the Midwest.
Single-family housing starts were also up nicely rising 5.3 percent above October. All privately-owned housing starts were 12.9 percent higher than November 2016.
Other
The advance report for U.S. retail and food services sales in November indicated a 0.8 percent increase over October sales and a 5.8 percent increase over November 2016. Retail trade sales were up 6.3 percent over November 2016, led by gasoline stations at a 12.2 percent increase and building materials and garden equipment and supplies dealers up 10.7 percent from last year.
Sales at furniture and home furnishings stores were up 8.4 percent over November 2016 and up 4.6 percent year to date. Retail trade sales in total were up 4.4 percent year to date.
The Consumer Price Index for All Urban Consumers rose 0.4 percent in November with the all items index increasing 2.2 percent over the last 12 months. The energy index accounted for three-fourths of the all items increase. The index for all items less food and energy only increased 0.1 percent in November. For the last 12 months, this index only rose 1.7 percent while the energy index rose 9.4 percent over that time. The food index rose 1.4 percent.
The unemployment rate held steady in November at 4.1 percent as total nonfarm payroll employment rose by 228,000. Over the year, the unemployment rate was down 0.5 percent and the number of unemployed persons declined 799,000.
Thoughts
The October results of our survey may have been a bit better than expected, but year to date orders and shipments are really pretty decent at the 5 percent level. While business may not be as consistent as we would all hope for, overall, when we sit back and talk with most people, they do admit that business is not all that bad. Certainly that is not true for all, but as our survey showed a high percentage are showing some sort of growth and the vast majority of those reporting declining orders and shipments are not off a huge percentage.
We hear from time to time that “retail is slow” but the national retail reports do not indicate that. So as we continue to talk with our clients, the key is to have most of those retailers as customers who are keeping the national numbers up.
Furniture Today posted a report stating that Mastercard reported a 5.1 percent increase in home furniture and furnishings sales during the holiday selling season.
Even with the slight decline in consumer confidence, both reports are a very high level. The strong stock market continues to help people feel better about spending. And the housing markets continue to prove that people are feeling better about home buying in spite of low inventories and higher prices.
If my trips to retailers with my grandkids the last couple of days is any indication, there have been an awful lot of people in the stores and on the roads. While some may be returning goods, it sure seemed like a lot were buying. Let’s hope that some of the bustle was in some furniture stores, which the grandkids didn’t care to go to.
