Our latest survey of residential furniture manufacturers and distributors revealed some disappointing results for December 2017 with new orders dropping 9% from new orders in December 2016. While we had heard some talk of business slowing down, this drop was a bit more than we had expected. The decline followed increases in October of 8% and 11% in November.
One thing that probably affected the significant decline was that December 2016 orders were 11% higher than December 2015, so we were comparing to a very strong month in 2016.
For the year 2017, new orders were up 4% over 2016 when they were up 3% over 2015. Orders were up for the year for some 66% of the participants.
Shipments in December were down 7% from December 2016, but shipments in December 2016 were 15% ahead of December 2015 so the decline was maybe not quite as poor as it may seem.
For the year 2017, shipments were up 4% over 2016 when they were up 3% over 2015. For the year, shipment increases were reported for 71% of the participants.
Backlogs fell 10% in December from November as shipments in dollars exceeded order dollars.
In spite of the slow finish in December, 2017 was what we would say was a decent year. While there were a few participants up low double digits, the participants in general were fairly close together.
Receivable levels in December were very much in line in spite of the lower shipment levels. Inventories were not able to be adjusted fast enough as inventories were 6% higher than December 2016 and 3% higher than November. But considering shipment and order increases of 4% for the year, the 6% increase over last year was not all that much out of line.
Factory and warehouse payrolls were only up 1% for the year and the number of factory and warehouse payrolls remained flat with last year.
The Conference Board Consumer Confidence Index increased again in February following a small increase in January. The Index improved to 130.8, its highest level since 2000 (132.6) with labor force being the main driver.
Consumers’ assessment of business conditions was also more positive as well as the short-term outlook. The outlook for short-term income prospects was a bit more mixed with both the positive percent and negative percent increasing.
The University of Michigan Survey of Consumers report noted that sentiment in early February was at the second highest level since 2004. It mentioned that the gyrations of the stock market did not seem to offset rising incomes, employment growth and favorable perceptions of tax reforms.
Existing-home sales fell for the second consecutive month with their largest annual decline in over three years. January sales were down 3.2% from last month. The decline put sales 4.8% below a year ago January sales.
The report blamed the decline on the lack of homes for sale as well as rising prices. Sales were down in all four regions of the country.
New single-family sales in January were down 7.8% from December sales and down 1% for January 2017. Sales were up in the Midwest and West but declined in the Northeast and South compared to January 2017.
As a bit of an offset to existing-home sales, housing starts were up 9.7% from December starts and up 7.3% from January 2017. Single-family starts were also up for the month and from January 2017. Single-family starts were up 11.9% in the Northeast, 2.0% in the South and 38% in the West, while declining 12.4% in the Midwest.
The Conference Board’s Leading Economic Index increased 1.0% in January after increases in the prior two months. This report did not reflect the volatility in the stock market. The report noted “The leading indicators reflect an economy with widespread strengths coming from financial conditions, manufacturing, residential construction and labor markets.”
The advance reports on retail and food services sales was another positive showing adjusted sales up 3.6% over January 2017. Retail trade sales were 3.9% higher than January 2017. Sales at furniture and home furnishings stores were up 4.7% over January 2017 on an adjusted basis and up 6.6% unadjusted.
The Consumer Price Index for all Urban Consumers (CPI-U) increased 0.5% in January. Over the last 12 months, the all items index increased 2.1%. The energy index increased 3.0% in January with gas price index increases offsetting declines in other energy indexes.
The unemployment rate held at 4.1% in January adding 200,000 jobs. Employment was up in construction, food services and drinking places, health care and manufacturing.
The results for December orders and shipments were somewhat disappointing but probably not all that unexpected. The order comparison was affected by the strong results in December 2016. As we noted last month, weather issues probably also affected the December results.
The national retail results continue to show decent growth and both consumer confidence reports were very positive. The Conference Board’s Index being highest since 2000 was very encouraging.
We expect the continued volatility of the stock market to have some effect, but it is almost as if, in general, consumers seem to be somewhat used to these issues.
We have heard that January started somewhat slow but seemed to pick up some and on into February. We have said it over and over, but from a national economic standpoint, there is no major reason for business not to continue to be pretty decent until something causes the economy in general to slow.