As we noted last month, many of our conversations since the first of the year have indicated that business seemed a little slow, but as we see, at least through January, new orders have continued to grow at a decent level, with new orders up 8% over January 2018. January 2018 orders were 2% higher than January 2017. December 2018 orders were up 7% over December 2017.
The not so good news is that everyone was not participating in these good results. In January, only one-half of the participants reported increased orders for the month. This was up from approximately 45% reporting increases last month. There were a good number of participants reporting only slight declines, but clearly these results do not reflect the rising tides that we would hope for.
The good news for January was that shipments were up 14% over January 2018 and some 75% of the participants reported increased shipments for the month. New orders are critical but shipments and subsequent collections pay the bills.
Shipments exceeded orders so backlogs fell 6% from December. Backlogs remained 9% ahead of last year, down from a 13% increase reported last month.
Receivable levels were up 12% but with the 14% increase in shipments, those levels seem in line. Inventories are 6% higher than January 2018, but again, these levels do not seem out of line considering the overall order and shipment rates.
Factory and warehouse payrolls and employees also seem in line. While the number of employees was down a bit, payrolls were up but not seemingly out of line.
Consumer Confidence fell in December and January but came back a bit in February. Unfortunately, according to the Conference Board, confidence fell again in March. The report noted that “Confidence has been somewhat volatile over the past few months, as consumers have had to weather volatility in the financial markets, a partial government shutdown and a very weak February jobs report.” But it does appear from the survey that consumers are confident that the economy will continue to expand in the near term.
The outlook for business conditions fell as well as labor markets. The outlook for short-term income though held steady.
The University of Michigan Surveys of Consumers report was different than the Conference Board’s report. The report noted that consumer confidence increased in March due primarily to households with incomes in the bottom two-thirds of the income distribution posting significant gains versus those in higher income brackets. Both groups voiced favorable growth prospects for the overall economy.
We saw mixed results in the housing markets. Existing home sales rebounded in February, reporting the largest month over month gain since December 2015. Three of the four regions reported gains in February with the Northeast unchanged. Sales remained 1.8% below a year ago. The report noted that a combination of lower mortgage rates, more inventory, rising income and relatively high consumer confidence was driving the sales rebound.
New home sales in January were 6.9% below December 2018 and 4.6% below January 2018. (This report was delayed due to government shutdown.) Sales were down in three regions with only the South reporting an increase.
Housing starts were also disappointing in February. Starts were 8.7% below January and 9.9% below February 2018. Starts were down significantly in the Northeast and West, while only up slightly in the Midwest and South.
The good news was that housing completions in February were 4.5% ahead of January and 1.1% ahead of February 2018.
The Conference Board’s Leading Economic Index for the U.S. (LEI) increased 0.1% in February following no change in January and a 0.1% decline in December. The report noted that while growth has slowed in the past six months, the economy should continue to expand in the near term, though the pace of growth could decelerate by year end.
Advance reports for U.S. retail and food services sales for January indicated an increase in sales of 0.2% over December and were up 2.3% over last January. Unfortunately, the report noted that sales at furniture and home furnishings stores were down 2.5% from January 2018 after showing a 3.5% increase for all of 2018 compared to 2017.
The Consumer Price Index increased 0.2% in February due to increases in shelter and food costs as well as an increase in the gasoline index. Over the last 12 months, the all items index increased 1.5%, down from 1.6% reported through January.
The most disappointing national news came from the nonfarm payroll employment, as while the unemployment rate dropped down to 3.8%, total employment only increased an estimated 20,000. The number of unemployed fell 300,000 affected somewhat by the temporary layoffs of government employees.
The results of our survey continue to show pretty decent results, especially considering much of the conversations over the last few months. But keep in mind that these results reported this month were through January. Last month we noted that some of the increase may have related to potential tariff issues. We also imagine some of January results could also have been affected by trying to beat any tariffs.
But obviously, not all the participants have had the same success with only 50% reporting increases this month and 45% in December.
Most recently, and we are borrowing from a client conversation yesterday, the words being used at retail and wholesale are “challenging.” It was also noted that traffic has been off. Maybe “traffic” has been off because weather has been so lousy for so long. That seems to be true for most parts of the country.
Add to that the volatility in the financial markets the government shutdown, the continued political rhetoric, and the slowdown of the economy in general, it seems to have slowed growth in certain areas.
The two consumer confidence surveys were once again at odds with each other. The whole reports included in our deeper dive are worth reading, especially the University of Michigan report.
Spring time is coming and so is an early High Point Market. We hope all retailers and designers will come. While business may be not all that great, it is hard to imagine being in the furniture business and not coming to see the latest in the best fashions available anywhere. We hope to see you.