The August results of our latest survey continued to reflect what we had been hearing in our conversations with clients and other executives in the industry. The demand for product, from especially June through August, as well as into September and October, has continued to be very strong with orders significantly higher than the same months of 2019.
August orders were a whooping 51% higher than August 2019 orders, following a 39% increase reported for July and 30% in June. Orders were up for some 88% of the participants, about the same as last month.
The August increase finally brought the year to date order results into a positive, compared to the same period a year ago, with orders now up 6%. That was a little misleading though as only 34% of the participants are in the positive for the year to date. But many of the rest are not that far off and we would expect more to reach positive territory after the September results are in.
Shipments were up 3% over August 2019 as participants are having a hard time either ramping up domestic production or importers are having trouble ramping up production overseas as well as getting containers to flow. Year to date, shipments remain 11% below last year, but down from a 14% decline reported last month. Shipments year to date were down for 85% of the participants.
Backlogs were up again in August rising 19% from July to a 102% increase over August 2019. As we said before, backlogs are getting into a territory that is not good and we continue to hear that they have grown even more since August.
Amazingly, receivable levels remain in apparent good shape considering shipment levels and inventories held steady in August as shipments are still lagging behind due to lack of inventories or at least the right kind.
The number of factory and warehouse employees continues to be an issue, or rather the lack of finding factory and warehouse employees. We are hearing that especially in NC and VA but also hear that from some others as well. The government programs hurt hiring and even with those cut back, it has been hard to find enough people who were already scarce, to fill the need for more workers due to the increased demand.
“Consumer confidence declined slightly in October, following a sharp improvement in September,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions improved while expectations declined, driven primarily by a softening in the short-term outlook for jobs. There is little to suggest that consumers foresee the economy gaining momentum in the final months of 2020, especially with COVID-19 cases on the rise and unemployment still high.”
But we thought the University of Michigan Survey’s of Consumers report gave some different insight into how consumers are behaving. University of Michigan Surveys of Consumers Director Richard Curtin said in their report “The University of Michigan surveys have always recognized two independent dimensions of consumer sentiment: the degree of optimism expressed by consumers and the degree of uncertainty surrounding their economic expectations. While the two dimensions are highly correlated, they are not always identical. In the current situation, the surveys have recorded rising optimism and a rising level of economic uncertainty.”
Existing-home sales grew for the fourth consecutive month in September, according to the National Association of Realtors®. Each of the four major regions witnessed month-over-month and year-over-year growth, with the Northeast seeing the highest climb in both categories.
The median existing single-family home price was $316,200 in September, up 15.2% from September 2019. Total housing inventory at the end of September was down 1.3% from August and down 19.2% from one year ago. Unsold inventory was at a 2.7-month supply at the current sales pace, down from 3.0 months in August and down from the 4.0-month figure recorded in September 2019.
New home sales were down 3.5% in September compared to August 2020 but were 32.1% ahead of September 2019. New homes sales were up substantially from last September in all regions except the Northeast where they were down 5.9%.
Single-family housing starts were 22.3% above September 2019 overall. Regionally single family starts compared to September 2019 were up 16.7% in the Northeast, 13.7% in the Midwest, 24.0% in the South and 24.4% in the West.
Retail sales were up 1.9% from August and 5.4% over September 2019. Sales at furniture and home furnishings stores were up 4.6% over September 2019 but remained down year to date, at an 8.8% decline.
The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.7% in September to 107.2 (2016 = 100), following a 1.4% increase in August and a 2.0% increase in July.
“The US LEI increased in September, driven primarily by declining unemployment claims and rising housing permits. However, the decelerating pace of improvement suggests the US economy could be losing momentum heading into the final quarter of 2020,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “The US economy is projected to expand in Q4, but at a substantially slower rate of 1.5% (annual rate) according to The Conference Board’s GDP forecast. Furthermore, downside risks to the recovery may be increasing amid rising new cases of COVID-19 and continued labor market weakness.”
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% in September on a seasonally adjusted basis after rising 0.4% in August. The index for all items less food and energy rose 0.2% in September after larger increases in July and August. The all items index rose 1.4% for the 12 months ending September, a slightly larger increase than the 1.3-percent rise for the 12-month period ending August.
Total nonfarm payroll employment rose by 661,000 in September, and the unemployment rate declined to 7.9%. In September, the unemployment rate declined by 0.5 percentage point to 7.9%, and the number of unemployed persons fell by 1.0 million to 12.6 million. Both measures have declined for five consecutive months but are higher than in February 2020 by 4.4 percentage points and 6.8 million, respectively.
Who would have thought that we would be dealing with the effects of the virus some eight to nine months later when most of us thought we would be through with it in probably 90 days when the news first broke? But even more hard to believe is that the residential furniture business would be growing this fast when so many other businesses are struggling or, worse yet, failing.
After three difficult months of significant negative growth in orders compared to 2019 results by month, our survey has shown three straight months of very significant increases in orders, and from all of our conversations, we expect our survey to continue to show significant growth in September and October and even into November.
The High Point October Market was certainly different. As expected, attendance was off significantly. The stretched-out days seemed to have accomplished the objective of keeping large crowds down. And as difficult as it was to only see a smaller number of customers each day, it appears that most buyers that made the effort to come were very serious, wrote orders, and did little tire kicking. The main objective seemed to be getting orders to exhibitors in hopes of getting product sooner than later.
In addition, premarket was totally different than ever before with many exhibitors showing that had not done so before. So overall, other than some boredom on the part of some of the exhibitors, the market seemed to be good. We also heard that many buyers were just so glad to get back to having a market after missing April all together.
There is a lot of concern over what impact the results of the election will have on business. I guess we will find that out in the next few weeks after all the ballots are counted. Let’s hope that folks remain civil no matter who wins. Enough said on that.