Executive Summary

Our latest survey of residential furniture manufacturers and distributors continued to show pretty much what we had been hearing in conversations and at premarket and the High Point Market. New orders in September were up 43% over September 2019 orders. This followed a 51% increase reported in August, 39% increase in July and a 30% increase in June. Orders were up for 91% of the participants for the month.

The September increase brought year to date orders up to an 11% increase over the same period last year. Some 56% of the participants are now reporting increased orders year to date after the significant declines reported in March and April.

Shipments were up 4% in September over September a year ago after a 3% increase reported last month. Some 59% reported increased September shipments. Year to date, shipments were down 10% compared to the first nine months of 2019. But there were 22% of the participants that reported an increase in year to date shipments, so hopefully folks are beginning to catch up.

But with orders so much higher than shipments, backlogs continued to grow, up 123% over last September. Last month, backlogs were 102% higher than August 2019, so large backlogs are clearly an issue. The large backlogs are creating issues at retail, but as discussed below, the shortage of workers to help to catch up, is clearly a part of the problem.

Receivable levels continue to be in good shape and all reports are that payments are pretty much timely for the most part. Inventories were drained when companies shut down early on and have not been able to catch up since most are shipping as fast as they can produce or import.

The number of factory and warehouse employees was down 5% in September vs September 2019 and payrolls were down 3%. The good news is the number of employees was up 2% from August, but that does not seem to be growing fast enough.

National

Consumer Confidence

The Conference Board Consumer Confidence Index® declined in November, after remaining relatively flat in October. The Index now stands at 96.1 (1985=100), down from 101.4 (an upward revision) in October. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – decreased slightly from 106.2 to 105.9. The Expectations Index – based on consumers’ short-term outlook for income, business, and labor market conditions – declined from 98.2 in October to 89.5 this month.

“Consumer confidence declined in November, after remaining virtually flat in October,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ assessment of present-day conditions held steady, though consumers noted a moderation in business conditions, suggesting growth has slowed in Q4. Heading into 2021, consumers do not foresee the economy, nor the labor market, gaining strength. In addition, the resurgence of COVID-19 is further increasing uncertainty and exacerbating concerns about the outlook.”

Housing

Existing home sales continued to rise for the 5th straight month. All four regions experienced month to month growth and significant year over year growth. Single family sales in October were up 4.1% from September and up 26.7% from October a year ago. The NAR predicted that 2021 sales would rise 10% over 2020 so that should bode well for furniture sales.

The median existing home price for all housing types was up 15.5% from October 2019, marking 105 straight monthly price increases. Total housing inventory was down 2.7% from September and down 19.8% from October 2019, continuing to drive prices up.

The new home sales report was not available at press time.

Housing starts were up 14.2% above October 2019. Single family starts were up 29.4% with all four regions up 28 to 41% compared to October 2019.

Other

Retail sales in October were up 0.3% from September and up 5.7% from October 2019. Retail trade sales were up 8.5% from last year and non-store retailers were up 29.1% from last October. Sales at furniture and home furnishings stores were up 5.2% from October 2019, but were down 7.2% year to date due to the declines in March and April.

Consumer prices were unchanged as the different components were both up and down very small amounts. Over the past 12 months, the all items index increased 1.2%.

The Conference Board Leading Economic index increased again in October but the report indicated that growth would likely be moderating and probably not likely to exceed 2.2% at an annual rate.

Nonfarm employment rose by 638,000 in October with the unemployment rate dropping to 6.9% and the number of unemployed persons dropping by 1.5 million to 11.1 million. Both of those measures are nearly twice the February levels of 3.5% unemployment and 5.8 million unemployed.

Thoughts

We have had four months in a row of great order rates compared to the same month of the previous year. We thought there would be pent-up demand, but who knew it would last this long. But as we have said before, we believe the good business is no longer pent up demand but driven by consumers being home more, having more money to spend and spending it at home.

From what we continue to hear, orders have continued very strong in October and November, though maybe not quite at the same levels. It seems that, assuming this potential “second wave” of the pandemic does not shut everything down, business should stay pretty strong into 2021.

Unfortunately getting goods delivered to customers has become the major issue. Not only is there a shortage of domestic employees and certain raw materials, but also freight has become a major issue, with both shortages of containers as well as with domestic carriers, as there are also driver shortages. All of this has caused backlogs to grow to uncomfortable levels.

Not that it matters, but consumers are also finding the same issues when it comes to other goods such as appliances. When you are quoted 6-week delivery for a washing machine and you finally receive it in about 15 weeks, the frustration is there as well. In the old days at the high end, you were told you might get your high-end case goods in three months. But as long as you delivered when you said you would, it was ok. That all changed when delivery times were shortened even in lower price goods. But it looks like consumers might need to be told realistic times for deliveries in hopes that they are not disappointed and still look forward to getting their products.

But let us be thankful for the good business while it lasts. Happy Thanksgiving to all from us.