Executive Summary

The results of our surveys of residential furniture manufacturers and distributors have been interesting all year. We started the year off with strong orders in January, which followed a nice year of growth in 2018, but then February started a string of reduced orders compared to the previous years for five straight months. We then saw a pickup in July only to see orders drop 3% in August. Now we get the September results, which showed a 7% increase over September 2018. And remember that September 2018 orders were 9% higher than September 2017.

Still proving that the term choppy when describing orders continue to be a fair term to use even with orders up 7%, orders were only up for 64% of the participants in the month. The September results brought year to date orders to a 1% decline compared to last year. Some 70% of the participants reported a decline in orders year to date.

Shipments in September were up 6% over September 2018. But, only 55% of the participants reported increased shipments. The increase in September pulled the year to date shipments up from the negative to at least even with last year. Still some 58% reported lower shipments year to date.

Backlogs increased as the dollar amount of new orders exceeded the dollars shipped. Backlogs were up 7% over August and 5% higher than September a year ago.

Receivable levels remained in line, about even with last year and in line with shipments year to date. Inventories remained high but dropped to a 12% increase over September 2018, down from a 14% increase reported last month.

Factory and warehouse payrolls and employment remained in line with current business conditions with the number of employees down 5% from last year.

National

Consumer Confidence

The Conference Board Consumer Confidence Index declined slightly in November after slight declines for the last three months. The Present Situation Index declined but the Expectations Index actually increased. The report noted that economic growth for the fourth quarter of 2019 will likely remain weak and that growth in 2020 is likely to remain around 2%.

Consumers were moderately optimistic about the short-term outlook. Those expecting business conditions to improve over the next six months declined slightly and the labor market outlook was mixed, but the short-term income prospects were favorable.

The report also noted that, “Overall confidence levels are still high and should support solid spending during the holiday season.”

Housing

Existing-home sales rebounded slightly in October after falling in September. Overall sales were up 4.6% from a year ago. Single-family sales were down slightly but remained 5.4% ahead of October a year ago. Sales were up nicely from a year ago in all regions – up a range of 5.7% to 7.8%, although compared to September, sales were down slightly in the Northeast and West.

Sales of new single-family houses were down slightly in October compared to September but up 31.6% from October 2018. All four regions were up significantly from last year. But October 2018 sales were down 12% from October 2017 so the comparisons of 2019 to 2018 was to some weak numbers for 2018.

Housing starts in October were up 3.8% above September 2019 and 8.5% above October 2018. Single-family starts were down slightly in the Midwest and West and down significantly in the Northeast. Starts were up 25.8% in the South.

Other

Advance estimates of U.S. retail and food services sales for October increased 0.3% from September and were 3.1% above October 2018. Sales at furniture and home furnishings stores were up 0.9% over October 2018. Sales at these stores were up 0.1% year to date.

The Consumer Price Index rose 0.4% in October after being unchanged in September. Over the last twelve months, the all items index increased 1.8%. The primary reason for the October increase was that the energy index increased 2.7% after recent monthly declines.

Total nonfarm employment rose by 128,000 in October. The unemployment rate was not changed at 3.6%. Employment gains were noted in food services and drinking places, social assistance and financial activities.

The latest estimate for GDP growth in the third quarter showed growth of 1.9% after growing at a 2.0% rate in the second quarter.

Thoughts

The September results were better than we expected overall, but certainly not for all. Even with the September increase, the year to date decrease of 1% in new orders seems to reflect the kind of year it has been. We continue to think that the overall economy is good and all the economic factors that support the industry are in good shape. In fact, retail overall has performed at a better pace.

But we almost always go back to the fact that most furniture purchases are deferable. Most of our furniture at home does not have to be replaced immediately, so usually housing moves are the reason to buy on a more immediate needs basis. So with overall housing results decent but not great, that leaves consumers more in the need for replacement items which can be deferred.

Why then are they deferred. Just listen to the news and hear how bad things supposedly are. We know the stock market and overall economy is in pretty good shape, but if those positives are even mentioned, they are followed by “it won’t last” and bad things are coming. Those along with all the presidential race information, just makes people a bit nervous.

That said, even if 2019 continues at the 2018 pace, we have had several years in a row of decent growth so all is not bad. It is just not as good as we all want it to be. So really it is a time to look for new ideas and products to help you with market share. Those ideas then convert to retailers and designers being able to show consumers more things they “have to have” or “want to have” enough to make them want to buy.

So let’s be thankful for the business we all have. Happy Thanksgiving to all.