Executive Summary

Well if we thought reporting the results of our survey of residential furniture manufacturers and distributors last month was a bit difficult, who knew what this month’s report would mean. We wish we could get more current information, but it just takes us to the end of the second month to get the participant results.

So once again we will be brief with the results of the survey and only briefly mention the national results, as realistically all of this is old news. As we had heard, 2020 started off pretty well through February and even the first part of March. New orders in February were up 6% over February 2019 making year to date orders up 4% over last year. About two-thirds of the participants reported increased orders.

Shipments were up 4% over February 2019 after a 3% decline in January (January 2018 compared to a very strong January 2017). Year to date, shipments were about flat with last year with just over one-half of the participants reporting increases.

Backlogs increased 2% over January and were 10% higher the February 2019. That was a good thing as when things slowed in March, there were some backlogs to work down, even though there were some cancellations.

Receivable and inventory levels were both in pretty good shape as inventories had dropped 4% from January and were only 3% up from February 2019. Factory and warehouse employees and payrolls were both in line with the then current conditions. Factory and warehouse payrolls were up 2% year to date, again pretty much in line.

Nationally, most of the reports in March were beginning to reflect the effects of the coronavirus. Consumer confidence in April fell again after a decline in March. The 90-point drop in the Present Situation Index was the largest on record. The Conference Board’s Leading Economic Index declined 6.7% in March, that being the largest decline in the 60-year history.

Existing-home sales fell in all four regions of the country though prices remained steady. New house sales were down 15.4% in March from February. Sales were down in all regions except the South where they were up 1.3%. Housing starts were down 22.3% from February. Retail sales in March were down 8.7% from February and 6.2% from March 2019. Sales at furniture and home furnishings stores were down 25% from March 2019 on an adjusted basis and down 4.3% year to date.

Consumer prices were down, driven primarily by a drop in the gasoline index. And the Advance estimate for GDP that just came out noted a decrease of 4.8% for the first quarter, obviously affected by the “stay-at-home” orders starting in March.

Thoughts

We have asked several people for possible comments on what to say in this issue of Furniture Insights. So far, the best comments that could be printed are “Good luck.” Seriously, what do you say? It is really hard to make an overall statement. Some of you, in places when you could, have been able to work at least on a limited schedule based on backlogs or designer orders or limited retail by appointment. Other have developed some health care products whether furniture or masks. And many of you have applied for the Payroll Protection Program loans and have experienced all sorts of fun with that everchanging exercise and its various interpretations. Hopefully, with the second wave of funding, most of you who qualified have been able to get some relief through those funds or the other loan program, deferred payroll tax payments, or other options.

Some states are opening back up. We hope not too soon. We know everyone really wants to get back to work. We do think it is going to be a while before we hit “normal” again, whatever that may look like. While some think the economy will come back strong and quickly, we are not sure how “quickly” that will be. As accountants are usually on the conservative side, we would suggest you plan on a slower recovery. Preparing for less business and getting a lot more is much better than assuming business back to pre-March levels and it not happening.

We are sorry there will be no spring High Point Market, but we think that was a wise choice.  We hope that by the time our May letter comes out and likely reveals weak March results, we will have a better idea of a go-forward plan.  In the meantime, stay safe and careful.