Executive Summary

The nice pick up in orders in July did not continue into August as new orders fell 3% compared to August 2018, according to our latest survey of residential furniture manufacturers and distributors. Some 67% of the participants reported a decline in orders. The August results left year to date orders down 2% from last year with 73% reporting lower orders year to date. We would note that August 2018 orders were up 9% over August 2017 and year to date orders in 2018 were up 6% over 2017.

Shipments in August were down 6% compared to August 2018. The 13% increase over July was normal due to the July vacation week causing shipments to be lower in July. The decrease in August was felt by most as 70% of the participants reported a decline in shipments. The August decline pushed year to date shipments into a decline of 1% compared to the same period a year ago. Shipments year to date were down for 64% of the participants. Year to date last year shipments were up 3% over 2017.

Backlogs in August remained at about the same levels as July but were up 3% over August 2018. In July, backlogs were up 1% over July 2018.

Receivable levels got back in line, declining 1% from August 2018, in line with the year to date decline in shipments of 1% and only rising 3% from July in spite of the 13% increase in shipments from July.

Inventory levels increased again, rising 5% from July and 14% over August 2018. Clearly, inventory levels are a concern for now and will need to be watched closely as most of what we have heard recently, orders have not picked up significantly in September and October. Factory and warehouse payrolls and employment remained in pretty good shape with year to date payrolls only up 1%. The number of factory and warehouse employees was 4% lower than August 2018.

National

Consumer Confidence

The Conference Board Consumer Confidence Index decreased very slightly in October. The Present Situation Index actually increased but the Expectations Index declined. Consumers saying business conditions were good increased and those saying business conditions were bad decreased. The assessment of the job market was mixed.

Consumers were less optimistic about the short-term outlook as those expecting business conditions to improve over the next six months declined. The outlook for the labor market also declined slightly though the outlook for short-term income prospects improved.

The report noted that “However, confidence levels remain high and there are no indications that consumers will curtail their holiday spending.”

Housing

Existing-home sales in September fell 2.2% from August after two months of increases. Despite the decrease from August, sales were still up 3.9% from September 2018. While each of the four regions reported a decline from August, all regions except the Midwest were up quite nicely from a year ago (the Midwest was about even versus September 2018).

Sales of new single-family houses were down from August but were 15.5% ahead of September 2018. Compared to September 2018, sales of new single-family houses were up very nicely in all regions except the Midwest where they were down 17.3%.

Housing starts were also off in September compared to August but remained 1.6% ahead of September 2018. Starts were up in the Northeast and South but fell in the Midwest and West compared to September 2018.

Other

Advance estimates for U.S. retail and food services sales in September indicated a slight decrease from August but a 4.1% increase over September 2018. Sales were up 3.4% year to date. Sales at furniture and home furnishings stores were up 1.1% from September a year ago but remained slightly in the negative year to date, off 0.2%.

The Consumer Price Index for all Urban Consumers in September was basically unchanged after an increase of 0.1% in August. Over the last 12 months, the all items index increased 1.7%. For the 12 months, the all items less food and energy rose 2.4%. The food index increased 1.8% over last year while the energy index decreased 4.8%.

Non-farm payroll employment in September rose by 136,000. The unemployment rate dropped 2 points to 3.5% in September, the lowest rate since December 1969. Employment in health care and in professional and business services continued to trend up.

Gross Domestic Product increased at an annual rate of 1.9% in the third quarter, according to the advance estimate released by the Bureau of Economic Analysis. The increase reflected positive contributions from personal consumption expenditures, federal government spending, residential fixed investment, state and local government spending and exports.

Thoughts

With overall business in the industry seeming a bit slow and continued use of the term we called “choppy”, we did not expect too much at the High Point Market. We have always said the “Mood” of market is usually good due to seeing old friends and great product shown the way it is supposed to be shown. Really, what is there not to be in a good mood about.

Yet, we heard not only good moods at market, but also a feeling of good business either being written (we know not as much is “written” anymore) or strong commitments. We know all of that can change when people got back home, but we were surprised by the positive comments we got really all the way to Wednesday morning.

Weather for the most part was good (maybe a little chilly in the early hours and a touch of needed rain). While some thought traffic was off, others thought traffic was good to up. We felt that overall it was either up or maybe flat for most. Anyone who did not come, missed a great opportunity to see some really nice product, with lots of color and just a feel-good market.

We asked most of the people we talked with the question of, if the overall economy is, for the most part good, why is the furniture business not better than it is? For the most part, the people tended to agree with our philosophy that it relates to bad news by the media.

Consumer confidence remains high in spite of the negative news. We still think that more positive results from housing will help the furniture business. The worries about a recession continue to be out there. Our theory for now is as follows. Most say that it takes four to six months for the economy to realize we are in a recession. So maybe the furniture industry is in a recession and by the time we figure it out, the recession will be over. Let’s hope that theory is right, though that is just what it is – our positive hope.