Executive Summary

We have continued to talk with people using the term “choppy” when describing business in the residential furniture industry as it relates to manufacturers and distributors. According to our recent surveys, the term continues to make sense. June 2019 orders were down 6%. That was followed by a 6% increase reported in July. August results showed a 3% decline, followed by a 7% increase in September. Keeping with the choppy conditions, our survey indicated that October orders fell 8% from October 2018. Some 70% of the participants reported lower orders in October. We would note that the High Point Market was one week later than in 2018 with the October 2019 dates very near the end of the month so that may have some impact on timing of orders.

Year to date, new orders were 2% lower than the same period a year ago with 73% of the participants reporting lower order rates. Last year, orders were up 6% year to date.

Shipments in October were 6% higher than October 2018 with 58% reporting increased shipments. Year to date, shipments remained even with last year. Backlogs were basically even with September as well as even with last October. We would note that backlogs in October 2018 were 14% higher than October 2017 so backlogs have been reduced pretty substantially as business has slowed over 2019.

Receivables continue to be reasonable considering shipment levels. Inventories remained high, 11% higher than last year, down from 12% reported last month.

Factory and warehouse payrolls and the number of employees remained at reasonable levels considering current business conditions.

National

Consumer Confidence

The December Conference Board Consumer Confidence Index was not available at press time, but even with all the impeachment news, as well as other national events, we do not believe confidence levels will change that much from the November results. The November indexes, while declining slightly, were still at overall high levels.

Housing

Existing-home sales slid slightly in November after gains in October. There were gains in the Northeast and Midwest, but there were declines in the South and West. Single-family sales were down slightly from October but were up 3.5% from a year ago. Sales, compared to a year ago, were up 3.8% in the Northeast, 1.5% in the Midwest, 3.7% in the South and 7.1% in the West.

Sales of new single-family houses were up 1.3% in November compared to October and up 16.9% from a year ago. Sales of the single-family houses compared to November 2018 were up 6.7% in the Northeast, 9.0% in the South and 47.9% in the West, while falling 1.4% in the Midwest.

Housing starts in November were up 3.7% from October and were up 13.6% from November 2018. Single unit starts were up 67.6% in the Northeast and 8.8% in the West. Starts fell 0.8% in the Midwest and 4.1% in the South.

Other

Advance estimates of U.S. retail and food services sales in November indicated that sales were up 0.2% from October and up 3.3% from November 2018. Sales for the November quarter were up 3.5% from the same period a year ago. Sales at furniture and home furnishings stores were up 1.9% from November 2018 and up 0.4% year to date.

The Consumer Price Index rose 0.3% in November after rising 0.4% in October. Over the last twelve months, the all items index increased 2.1%, higher than the 1.8% reported in October. Increases in shelter and energy indexes were major factors in the increase in the all items index. The food index rose 2.0% over the last twelve months.

Total nonfarm employment rose by 266,000 in November. The unemployment rate dropped slightly to 3.5%. Job gains were noted in health care and professional technical services. Employment rose in the manufacturing sector due to the return of workers from a strike.

The latest estimate for GDP growth in the third quarter showed growth of 2.1% up slightly from growth of 2.0% reported for the second quarter of 2019.

Thoughts

The ups and downs of monthly reporting by our participants continued in October, but conversations remain that business is just ok at best for many and off for others. The 2% decline in new orders through October pretty much sums up the 2019 conditions. And with over 70% of the participants reporting lower orders year to date, it is clearly reflecting the weaker overall results.

Overall, the economy continues to do reasonably well. We think the survey results may be affected by several things, but we would point out one not mentioned recently. We think deflation has something to do with the lower orders. The deflation we are describing now may not be coming necessarily from cheaper Asian produced products, but maybe by the impact that many believe that the millennial generation have not reached a mature buying age. Therefore, these consumers may be buying cheaper products and also buying through non-traditional sources, which is probably not reflected in our more traditional suppliers.

We continue to think the negativity of the upcoming elections keeps a damper on spending for our deferrable purchase items. But having just bought a new phone, once again our typical furniture purchase can be pushed off by the new latest and greatest gadget costs. Who would have thought a few years ago that the phones that phone service companies “threw in for free” if you just signed up for services, would now be coaxing people to not only buy more services, but would also talk some (not me) into paying over $1,000 for a phone (I know they are more than a phone, but really that is the main reason for buying one).

Now we multiply whatever cost by at least 4 (normal family size) and we wonder how many consumers can afford to buy furniture at all.