Executive Summary
Our latest survey of residential furniture manufacturers and distributors seemed to reflect what we were hearing in our discussions with those in the industry. Probably the biggest surprise was that new orders in June were 30% ahead of June 2019. We had heard from many that June orders had really started to come in better than expected but the increase over June last year was more than we would have thought. New orders were up for 73% of the participants. In May, new orders were down 8% from May 2019.
Year to date, new orders were down 16% from the same period last year after an 18% decline reported last month. Some 81% of the participants reported a decline in orders year to date.
Shipments in June were down 7% from June 2019 which was pretty much in line with the decline in orders reported in May. The results were pretty much split though, as about one-half of the participants reported increases and the other one-half reported a decline.
Year to date, shipments were down 21% with 94% of the participants reporting a decrease in shipments. Backlogs were up 21% over May as the dollar amount of orders exceeded the dollar amount of shipments.
Receivable levels were in line with year to date shipments. The month to month comparisons may be difficult for a while as there will likely be timing issues for a while until things settle down.
Inventories were down 13% from June 2019 and down 5% from May 2020. Participants continue to adjust these levels to current conditions as it is difficult for manufacturers to bring down inventories quickly when business had been so good and also difficult for importers to adjust quickly as well. Then to be able to anticipate how long the improvement will last.
The number of factory and warehouse employees and their payrolls seems in line considering the effects of the payroll protection program from the government as well as the fast-changing business conditions. Many are now complaining with business so good; the problem has been lack of ability to bring people back, as well as hire new people.
National
Consumer Confidence
The Consumer Confidence Index declined again in August falling to 84.8 from 91.7 in July and 98.3 in June. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – decreased sharply from 95.9 to 84.2. The Expectations Index –based on consumers’ short-term outlook for income, business, and labor market conditions – declined from 88.9 in July to 85.2 this month.
According to the report “The Present Situation Index decreased sharply, with consumers stating that both business and employment conditions had deteriorated over the past month. Consumers’ optimism about the short-term outlook, and their financial prospects, also declined and continues on a downward path. Consumer spending has rebounded in recent months but increasing concerns amongst consumers about the economic outlook and their financial well-being will likely cause spending to cool in the months ahead.”
Housing
Existing home sales continued a strong upward trajectory in July, with two straight months of significant sales gains. All four regions had significant month over month increases, and all regions except for the Northeast had significant gains over July 2019, which was really good news. Single family sales in July were up 23.9% over June 2020 sales and were up 9.8% over July 2019. Housing inventory was down 2.6% from June and down 21.1% from a year ago. The median existing home price was up again in all regions and marked the 101st straight month of price increases in year over year gains.
New house sales were also up quite nicely with sales up 13.9% over June and 36.3% above July 2019. New house sales were up considerably in all four regions of the country compared to July 2019 sales. Housing starts were also up nicely, up 22.6% from June and up 23.4% over July 2019. Housing starts were up nicely in all regions except for a 6.8% decline in the West.
Other
Retail sales increased 1.2% in July from June and were 2.7% ahead of July 2019. Total sales for the May to July period were down 0.2% from the same period a year ago. On an adjusted basis, sales at furniture and home furnishings stores were down 1.9% from July 2019 and down 13.5% year to date from the same period last year. The decline year to date last month was 16.4%.
The leading economic indicators report showed another increase, up 1.4% in July following a 3.0% increase reported last month and a 3.1% increase in May. Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board said “Despite the recent gains in the LEI, which remain fairly broad-based, the initial post-pandemic recovery appears to be losing steam. The LEI suggests that the pace of economic growth will weaken substantially during the final months of 2020.”
The consumer price index increased 0.6% in July, the same as the increase posted in June. Over the last 12 months, the index increased 1.0%. The energy index increased 2.5% led by a 5.6% increase in gasoline index. This increase was partially offset by a 0.4% decline in the food index, with the index for food at home declining 1.1%. The food index increased 4.1% over the last twelve months. Despite the increase in the energy index last month, the energy index fell 11.2% over the last 12 months.
Total non-farm employment increase 1.8 million in July while the unemployment rate dropped to 10.2%. The number of unemployed persons fell by 1.4 million to 16.3 million. This number was up 10.6 million since February.
Thoughts
We have continued to hear that business has been better than expected as we came out of the months of March, April, and part of May, though there have been some recent rumors that not everyone is doing as well as others. We know there had to be pent up demand out there as those who had been planning to buy came back in a hurry once the stores opened and/or chose also buy online, either through a store or online retailer. Being at home more certainly made some of us notice things that could be improved!
When it will end, or slow down, is anyone’s guess. Maybe it has for some already but for many, business has remained strong. We applaud the retailers who have figured out new ways to get to customers and meet their needs. We know that many of them have had issues with not having inventory and some of the suppliers have not had sufficient finished goods to help. But for those who had inventory or could turn custom made in a relative hurry, it has been some good times.
We hear that premarket may be more like market than ever before. But also realize that the High Point Market will likely also be like never before, but not necessarily in a good way. We know foreign travel will likely cut back significantly along with reduced domestic. We hope the Governor will be more aggressive with his next decision about opening things up and in a way that will more fully support the business community in general.
We should get some feel for the impact social distancing and masks, etc. will have at premarket. Hopefully, we can use it as a test case for the best way to handle the October market.
We wish we had more words of wisdom, but these uncharted waters make it hard. We will still have to work through all the negative political stuff for a couple more months unfortunately. We hope and pray to hear good news on a vaccine, as well as good meds for treatment of the virus.
Stay safe and healthy.
