Executive Summary

As we suspected last month, the results for March would not be very pretty and the actual results were not. New orders for March were down 29% from March 2019 and 23% from February. February orders were up 6% over last year. Orders in March were down for 87% of the participants versus increased orders in February for 71% of the participants.

Year to date, new orders declined 8% and were down for 69% of the participants. At the end of February, orders year to date were up 4% and up for about 67% of the participants.

Shipments fell 11% in March from March 2019 with 68% reporting a decline in shipments. The March decline brought year to date shipments to a 4% decline for the year with 59% reporting declining shipments.

The decline in shipments was not as severe as the decline in orders as participants were working off backlogs so shipments were sustained in some cases, though backlogs also were down due to cancellations as well.

Backlogs fell 16% from February to March and were down 8% from March last year.

Receivable levels seemed pretty much in line at least with year to date shipments. The decline in orders and shipments that occurred so quickly did not allow for adjustments to inventory levels as inventory levels remained steady with February.

Factory and warehouse payrolls declined 13% from last March, but these comparisons for the next couple of months will be difficult as treatment of lay offs, furloughs and Payroll Protection Program effects will likely be considered differently for many.

National

Consumer Confidence

Nationally, it was interesting to see that the May Consumer Confidence Index held steady after the big drops in April and March. The Present Situation Index fell slightly but the Expectations Index improved. There were concerns over financial prospects, as we might expect as well as concerns over inflation. The report noted that “while the decline appears to have stopped for the moment, the uneven path to recovery and potential second wave are likely to keep a cloud of uncertainty hanging over consumers heads”.

Leading Indicators

The Conference Board Leading Economic Index declined 4.4% in April after a 7.4% decline in March, the March decline being the largest in the 60-year history. Pretty much everything in April was down except the stock market and interest rate spread.

Housing

Existing-home sales fell again in April with sales down 17.8% from March and were down 17.2% from April 2019. Single-family sales were down similar percentages while prices were up 7.1% from last year. April’s decline from March was the largest month over month decline since July 2010 (-22.5%).

Regionally, sales were down in all four regions in April, compared to April 2019. Sales were down 18.2% in the Northeast, 8.3% in the Midwest, 16.8% in the South and 27.0% in the West. Prices continue to rise significantly in all regions.

Sales of new houses were also down from last year, dropping 6.2% from April 2019. New house sales were up 26.5% in the Midwest and 4.7% in the South while falling 26.5% in the Northeast and 33.5% in the West.

Housing starts in April were 30.2% below March 2020 and 29.7% below April 2019. Starts were down significantly in all four regions of the country.

Other

Advance reports for retail sales in April noted a 16.4% drop from March and a decline of 21.6% from April 2019. Clothing and clothing accessory stores were off 89.3% from April 2019 while nonstore retailers were up 21.6%. Sales at furniture and home furnishings stores in April were down 66.5% from April 2019.

Consumer prices were down 0.8% in April, the largest monthly decline since December 2008. The decline in the gasoline index was the major contributor to the decline. Also declining were the indexes for apparel, airlines and lodging away from home. Food indexes rose as food at home posting its largest increase since February 1974.

Nonfarm employment fell by 20.5 million in April and the unemployment rate rose to 14.7%. This 10.3% increase in the unemployment rate was the largest month over month increase in the history of the series, dating back to 1948.

The Gross Domestic Product decreased at an annual rate of 5.0% in the first quarter according to the second estimate after a 2.1% increase in the fourth quarter of 2019.

Thoughts

As we noted last month, it is hard to really know what to say about the economy, the furniture industry, and most anything else in this environment. As can be seen in the details, there were records broken in some of the national news or if not records, new marks set from many years ago. As we write this month’s edition, we are starting to open up the economy state by state, but there are so many differences of opinion as to how and how fast to do it.

We do not have April results yet, but we did a straw pole with a small number of manufacturers and distributors early this month. We did not weight it but just as what percentage orders were down in April. The results showed over a 70% decline in orders with expectations for May in the 50% decline range.

Obviously, none of us have seen anything like we are going through at least since the Depression. The Federal Government Programs have certainly helped individual families as well as companies through the PPP and other programs, but there are many folks still in pretty bad financial conditions, as well as other effects of stay at home. And unfortunately, as usual, politics starts to rear its ugly head as well, as there are so many different medical and popular opinions. For every 25 points one side can raise, there are another 25 on the other side. But we believe we will get through all of this and hopefully soon. It appears consumers believe we will, so let’s get things opened back up and see what happens.

Best of luck to all of you in the industry. You have come through struggles before. We know you can do it again. This climb should not take as long as it did in 2008 and thereafter.