As we noted last month, the increase in new orders was expected to slow and in our November survey, they did. New orders were up a respectable 17% in November compared to November 2019. This increase followed increases of 30% in June, 39% in July, 51% in August, 43% in September and 40% in October. About three quarters of the participants reported increased orders for the month, similar to last month. Year to date, new orders remained up 14% over the first 11 months of 2019 after the significant declines as the pandemic took effect. Year to date, some 66% of the participants are now reporting increased orders.
Shipments continue to lag behind with only a 3% increase in shipments vs. last November. Year to date, shipments were 7% behind last year, down from 8% reported last month. The flow of imported goods remains a problem. According to a survey of several industry leaders by Furniture Today of their priorities for this year, working on the flow of goods and logistics seems to be high of almost all of their lists of issues to tackle.
Backlogs continued to grow in November to levels certainly not remembered in my years of following our statistics. We hear of some custom upholstery companies quoting as many as 20 weeks for delivery. We have heard that backlogs are slowly coming down, but that is a slow process due to lack of trained people as well as the issues discussed regarding flow on goods especially from Asia.
Receivable levels continue to be in pretty good shape and based on some of our conversations, most are watching them carefully and not shipping if customers are behind. We think some of the PPP federal money may have helped many of the dealers to stay current.
Inventory levels are low from where they need to be but case goods have been hard to come by for imported goods and there has also been some shortages of raw materials for upholstery suppliers.
The number of factory and warehouse employees was down 3% in November as well as payrolls. We understand domestic manufacturers are doing all they can to hire people, but even when they do, the cost of training is really hurting productivity and is costly.
The Conference Board Consumer Confidence Index® improved moderately in January, after decreasing in December. The Index now stands at 89.3 (1985=100), up from 87.1 in December. However, the Present Situation Index – based on consumers’ assessment of current business and labor market conditions – decreased from 87.2 to 84.4. The Expectations Index – based on consumers’ short-term outlook for income, business, and labor market conditions – increased from 87.0 in December to 92.5 this month.
According to the report, consumers’ expectations for the economy and jobs advanced further, suggesting that consumers foresee conditions improving but the COVID 19 situation still has consumers concerned. The report also indicated that a growing percent of consumers expect to buy a home in the next six months so it is expected that home sales will continue on into 2021. The outlook for short term income prospects was mixed.
Existing-home sales rose in December, with home sales in 2020 reaching their highest level since 2006. The results were mixed by region on a month to month basis but each of the four regions experienced double-digit year over year growth. Single family home sales were up 22.8% over December 2019.
The median price for existing home sales was up 12.9% over December 2019. Housing inventory was down 16.4% from November and down 23% from December 2019. This represented a 1.9 month supply at the current sales pace.
New residential sales were up nicely at 15.2% above December 2019. Compared to December 2019, sales were up significantly in all regions except the Northeast.
Single family housing starts were 27.9% higher than December 2019 with high double-digit growth in all four regions.
Retail and food service sales for December decreased 0.7% from November but were 2.9% ahead of December 2019. This result was mixed as food service sales were lower, while retail trade sales were up 6.3% over December 2019. Sales at furniture and home furnishings stores were up 3.1% over December 2019. For the year, after the disaster of March to May sales, sales at these stores were only down 5.4%.
Consumer prices increased 0.4% in December and were up 1.4% over the last 12 months. The seasonally adjusted increase was driven by an 8.4% increase in the gasoline index which represented more than 60% of the overall increase. The index for all items less food and energy rose 1.6% over the last 12 months.
Nonfarm employment declined by 140,000 in December due to the increase in the Coronavirus cases. The unemployment rate stayed at 6.7%.
The Conference Board Leading Economic Index increased again in December, up 0.3% but the report indicated its pace of improvement has been decelerating in recent months, suggesting a significant moderation in growth as the US economy heads into 2021.
For the year, real GDP decreased 3.5% in 2020 after a 2.2% increase in 2019.
The good results for new orders continued through November, though the increase in orders did slide somewhat. We had expected that slowdown in the increase based on conversations, so it was no surprise. We expect somewhat similar results in the December survey. That being said, the consensus with most folks we talk to is that we should continue this good ride on into 2021.
One of the major concerns that we are hearing is that some dealers are starting to hear about cancellations due to the long lead times.
On the good side, most of the economic data that we think drives furniture sales is still good. Consumer confidence picked back up a bit. Housing continues to be very strong in spite of the higher prices. Interest rates continue to be in a good place. We have seen the consumer price index tick up and with the new rules coming out on drilling, we are already seeing spikes in gas prices.
Still leisure travel remains down and spending on the fun things remains low. This continues to leave more money in Consumers’ pockets and purchases for the home seems to be the place that many are spending their extra money on.
The cost of furniture is going up whether for imports or for domestic materials. With demand this strong, we hope that at retail and wholesale, the industry does not give up margins just to chase sales. We realize the industry thrives on low prices in too many cases, but it makes no sense to try to enjoy all these increased sales at low margins. This is the time to make some margins back; not crazy but good solid margins which have eroded in the last number of years.
Again, stay safe. Get your vaccines if you believe in them