Our latest survey of residential furniture manufacturers and distributors seemed to reflect what we had been hearing as we continue with this Coronavirus pandemic. New orders in May 2020 were down 8% from May 2019 after a 61% decline reported in April. New orders in May were up 166% over April. Somewhat a surprise was the fact that some 19% of the participants actually recorded an increase in May orders over May 2019.
The May, April, and March results offset the fairly good results of January and February resulted in a decline in year to date orders of 18%.
In May, shipments were down 31% after a 50% decline reported for April. The lower shipments was expected as a result of the decline in orders the last three months. A few participants reported increased shipments over May 2019. Year to date shipments were down 18%.
Backlogs increased 20% over April and were 13% higher than May 2019 due to orders exceeding shipments.
Receivable levels were 25% lower than last year and, considering shipments down 31%, seemed at least reasonably in line. We will need to keep an eye on receivables in the next few months as we see what happens as stores are reopened as well as how the recovery works for many retailers.
Inventories fell 10% from April and were 6% below May 2019. From what we heard, several case goods companies who had significant inventories in their warehouses, were able to take advantage of retailers who needed inventory quickly.
Factory and warehouse employees and payrolls varied significantly as the effects of the Payroll Protection Program kicked in for many companies. It will take a while for these results to get back to something near normal.
Consumer Confidence declined in July primarily due to a decline in the Expectations Index. The overall index fell to 92.6 from 98.3 in June. The decline in the Expectations Index was caused by large declines experienced in Michigan, Florida, Texas, and California. The report blamed these declines on the resurgence of the COVID-19 in those states. The report noted that consumers were less optimistic about short-term prospects. “Such uncertainty about the short-term future does not bode well for the recovery, nor for consumer spending.”
Existing home sales rebounded in June rising 20.7% from May but were still down 11.3% from June 2019 results. Single family sales were up 19.9% over May but down 9.9% from June 2019. All four regions reported increases over May although each of the regions reported declines from June a year ago.
New home sales increased 13.8% over May 2020 and were 6.9% ahead of June 2019. New home sales were up in all regions except for the South where they were down only 1.8%.
Housing starts in June were up 17.3% over May 2020 but were down 4% from June 2019. Starts were down in the South and West, flat in the Midwest but up 53.2% in the Northeast.
Retail sales in June were up 7.5% over May and were 1.1% above June 2019. Retail trade sales were up 6.4% over May and up 5% over June 2019. Nonstore retailers were up 23.5% over June 2019 and building materials and garden equipment and supplies dealers were up 17.3% over last year. Stay at home folks clearly led those categories.
The report on the Leading Economic Indicators, while showing a 2% increase in June, noted that “Together with the resurgence of new COVID-19 cases across much of the nation, the LEI suggests that the U.S. economy will remain in the recession territory in the near term.”
Sales at furniture and home furnishings stores were up 32.5% over May but were down 3.5% from June 2019. Year to date, sales at these stores were down 16.4%.
The consumer price index increased 0.6% in June after a 0.1% decline in May. The primary reason for the increase in June was due to an increase in the gasoline index.
Total nonfarm employment rose 4.8 million following so many layoffs in March, April and May. The unemployment rate dropped to 11.1%.
The May results of our survey continued to show positive trends for continued improvement. From what we have heard, June and July business has continued to improve with some saying that business has been better, volume wise, than last year. Of course, many folks in our industry tend to be afraid to get too excited, thinking that this “bubble” will end soon, just a matter of time.
The reality is that some of that thought is probably true. We realize that with business basically shutting down for at least a couple of months, there would be a surge from normal business stopping then starting up again with a spurt.
Both the Leading Economic Index and Consumer Confidence reports indicated that in the short term, economic recovery may be slow. In fact, the term “recession territory” in the near term was used. So we know that plans need to be considered for moving through the possible slower times ahead.
The Payroll Protection Program, while fraught with all sorts of issues, did allow many in the industry to try to keep employees together. It also helped cover other costs such as rent, including things like showroom rent. So we hope that most of you were able to take advantage and will be able to get most or all of the loans forgiven.
We should hear the next government plans in the next few days. As we always have heard the words, “I am from the government and I am here to help you” are not words we want to hear or believe, we do think that some of the efforts have been helpful.
We keep reminding ourselves that we have not been through times like these in almost all of our lifetimes. So we do not have a map for what to do. We wish all of you the best in working your way through what we hope will be a short time until we get back to something closer to normal.