Executive Summary

After hearing about how sluggish business was in the first quarter, our survey of residential furniture manufacturers and distributors for March pretty much confirmed that the quarter was a bit weak. New orders for March were 2% higher than March in 2017. Only 42% of the participants reported increased orders.

Year to date, new orders were up 3%. Not terrible but certainly not strong. Only 56% of the participants reported growth in orders for the quarter.

Shipments in March 2018 were flat compared to March 2017 and up only 1% for the quarter. About one-half of the participants showed growth in shipments for the quarter.

Backlogs were up 1% from March 2017 and even with February as orders, in dollars, were just slightly higher than shipments.

Receivable levels remained in good shape and inventory levels fell 2% from February – a good thing. Inventories still were 9% higher than March 2017, seemingly too high for current business conditions.

Factory and warehouse payrolls and the number of employees remained in line for current conditions.

National

Consumer Confidence

The Conference Board Consumer Confidence Index improved slightly in April following a slight decrease in March. Both the Present Situation Index and the Expectations Index improved. The report indicated consumers’ assessment of current conditions increased to a 17-year high suggesting that the level of economic growth in Q2 is likely to have improved from Q1.

The only real negative indicated that the percentage of consumers expecting an improvement in short term income prospects declined while those expecting a decrease rose from 7.9% to 8.2%.

The University of Michigan Surveys of Consumers reported slightly different results noting that their index declined slightly but has remained in a narrow range since the election. The concern noted in this report is that inflation may be exceeding income increases.

Housing

Existing-home sales fell slightly in April both on a monthly and annualized basis. All four regions of the country saw no gain in sales actively last month.

The negative for existing-home sales remains a very low supply of homes on the market, coupled with higher selling prices as the lack of inventory is driving up pricing. Add to that, increasing mortgage rates and you end up with slower sales. Three of the four regions reported lower sales than last year with only the South reporting a slight increase.

Sales of new single-family houses in April fell slightly from March but sales were up 11.4% from April 2017. Compared to April 2017, sales of these houses were up 5.3% in the Northeast, 26.4% in the Midwest, 6.0% in the South and 18.9% in the West.

Single-family housing starts also fell from March but were up 10.5% over April 2017. Starts were up in all regions except the Midwest where they fell 15.2%.

Other

The Conference Board’s Leading Economic Index (LEI) for the U.S. increased 0.4% after increases of 0.3% in March, 0.7 in February and 0.8 in January. The growth has moderated somewhat in the last six months. The report indicated that growth is unlikely to strongly accelerate but that growth should continue in the second half of 2018.

The advance report for April showed monthly sales for retail and food servicer increasing of 0.3% from March and 4.7% over April 2017. Sales for February through April were up 4.6% from the same period a year ago.

Sales at furniture and home furnishings stores were up 6.1% from April 2017. Year to date, sales at these stores were up 5.3%.

The Consumer Price Index increased 0.2% in April after falling 0.1% in March. For the last twelve months, the all items index has increased 2.5%. The indexes for gasoline and shelter led the way with the food index also increasing.

Non-farm payroll employment increased by 164,000 in April after a 103,000 increase in March. The unemployment rate edged down to 3.9% following 6 months at 4.1%.

Thoughts

After most of our conversations during the first quarter, we were concerned over what appeared to be sluggish and uneven business in the industry. The final results of our survey for the quarter proved most of that to be true. Yet, the High Point Market seemed to end on a very good note and it seems that business has gotten a bit better.

The April economic data was very positive for the most part and May seems to be following along. The one part of the economy that is causing some issues is finding employees. This has been an issue for especially manufacturers but is also apparently true for many others. We had a meeting with some business leaders here in High Point recently and the conversation was the same for trucking companies, warehouse workers and even helpers at early education facilities. This has become a pretty major problem so it may be good that business is not so robust.

Overall consumer confidence remains strong which we believe is the key to good furniture business. Interestingly it continues strong in spite of crazy fluctuations in the stock market (for what real reasons, we wish we knew), rising prices in some items and increasing interest rates. We hope that this confidence can remain as according to the national reports, retail furniture did well through April 2018.

We realize that all businesses are not “national” and just like with our survey, all companies did not accomplish average. Let’s hope that the economy continues to improve as the reports indicate so that we can return to higher percentages of participants showing improvements.