Executive Summary

As we somewhat expected, the results of our survey for March 2019 confirmed what we had been hearing. The survey of residential furniture manufacturers and distributors showed new orders in March 2019 down 3% from March 2018 following a 5% decline in February. This decline in orders brought the year to date results to a flat order rate for the full quarter. Only 42% of the participants posted increased orders year to date.

Shipments were 1% lower than March 2018 following a 3% decrease reported last month. So, after a fast start in January, year to date shipments only increased 3% for the quarter. Backlogs remained steady from February as the dollar amount of orders was about the same as the dollar amounts shipped. Backlogs remained 4% ahead of March 2018.

Receivable levels appear to be a bit out of line considering shipment levels, up 9%. Shipments in March were substantially higher than February so these results may just be a timing issue. Inventory levels were down 1% from February but remained 6% over March 2018, up from a 5% increase reported last month.

Factory and warehouse employee levels and payrolls appear to be in line with shipments.

National

Consumer Confidence

The latest Consumer Confidence report showed even more improvement in May following an increase in April. Both the Present Situation and Expectations Indexes improved bringing the Index back to levels from last Fall – near 18-year highs. The prospects for business conditions, both now and in six months as well as job prospects were improved. Those expecting better income prospects was a bit more mixed but still good. The report indicated the consumers expect the economy to continue growing at a solid pace in the short term, and despite weak retail sales in April, the high levels of confidence suggest no significant pullback in consumer spending in the months ahead.

Housing

Existing-home sales were off just a bit in April, continuing what was reported in March. Total existing-home sales fell 0.4% in April with sales down 4.4% from a year ago. Single-family sales fell 1% in April from March and were down 4% from April a year ago. The existing-home sales were off slightly in the Northeast and South, with sales flat in the Midwest, while the West saw growth.

Lawrence Yun, NAR’s chief economist said that he was not overly concerned with the dip in sales and expects moderate growth relatively soon.

New home sales in April were off 6.9% from March but up 7.0% over April 2018. Compared to last year, new house sales were up 3.6% in the Midwest, 5.1% in the South and 16.8% in the West, while falling 12.1% in the Northeast.

Housing starts in April were up 5.7% from March but were 2.5% below April 2018. Single-family starts were up 6.2% over March but down 4.3% from April 2018.

Other

The Conference Board’s Leading Economic Index for the U.S. increased again in April. The report noted that even with favorable stock prices (until just recently) financial conditions and consumers’ outlook, the economic growth is expected to moderate towards 2% by year end.

Advance estimates for U.S. retail and food services reported a decrease of 0.2% in April from March. Though the April results were 3.1% ahead of April 2018. Retail trade sales were also down 0.2% but 2.8% ahead of last year. Sales at furniture and home furnishings stores were down 3.0% from April 2018. Year to date, sales at these stores were down 1.4% from the same period a year ago.

The Consumer Price Index increased 0.5% in April after a 0.4% increase in March. The gasoline index accounted for over two-thirds of the increase rising 5.7%. The all items index increased 2.0% for the 12 months ending April, the largest increase since November 2018.

Nonfarm employment increased again in April, rising 263,000. This brought the unemployment rate down to 3.6%. This was reported as the lowest unemployment rate since December 1969. Most job gains occurred in professional and business services, construction, health care, and social assistance.

Thoughts

February and March orders and shipments clearly slowed for a majority of our participants. From conversations, business was not that much better in April though some did get some pick up at the High Point Market. Last month we noted that conversations reported not much pick up since market, but we have noted some late April improvement.

Lately, there does seem to be a bit more optimism with seemingly some pick up in May. Weather continues to affect a great deal of the country with flooding and tornados doing substantial damage in many parts. Clearly those issues are affecting business.

We think consumers are getting mixed messages over and above the normal political jargon (though if you listen to any of it, it clearly will affect you). The China trade talks have negatively affected the stock market causing concerns for consumers. Yet, they continue to hear good news from consumer confidence and employment data. So, confidence is strong, but it has not yet bled over to retail buying. We just keep thinking that business should be better than it is. Job creation and increased incomes should not only help with home buying (considering low mortgage rates) but also should help furniture sales.

Hopefully, Memorial Day sales were good for most and we can kick off summer with those sales.