According to our latest survey of residential furniture manufacturers and distributors, new orders in January 2021 continued the rapid increases compared to the previous year. New orders were up 27% compared to January a year ago, the same percent increase as last month. This marked the 8th straight month that orders were higher than the previous year. While not normally any big deal, these increases have all been in the higher double digits. Of course, starting in a couple of months, we will go through even greater comparisons when we compare March and especially April and likely May.
Shipments were only up 7% as shipments are continually hampered by shortages of supplies, primarily foam, and people for upholstery companies and various shipping and freight issues for case goods folks, as well as people and other supply issues for many of the domestic manufacturers. Some 77% of the participants reported increased orders for the month and some are experiencing very large double digit growth.
Once again orders exceeded shipments, so backlogs increased again. We have discussed these issues before, but these levels of backlogs are really hard to deal with. Customers do not want to wait this long especially once they got excited about placing an order. Pricing continues to be an issue as well, as costs are going up before goods can be delivered or even made in some cases.
The good news is that receivable levels seem to be in line. We continue to think that the PPP loan forgiveness program has allowed people the funds to make it through the tough times, then as orders have picked up, the dealers have been able to keep up their payments.
Inventories remain too low but that issue has been hard to change with the needs for raw materials and all the freight and import issues we have discussed before.
The lack of factory and warehouse workers remains an issue. Some blame lack of trained employees and some blame some of the government funds being passed out which doesn’t incentivize some to want to work.
The Conference Board Consumer Confidence Index® surged in March to its highest reading in a year, after a modest increase in February. The Index now stands at 109.7 (1985=100), up from 90.4 in February. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—climbed from 89.6 to 110.0. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—also improved, from 90.9 last month to 109.6 in March.
“Consumer Confidence increased to its highest level since the onset of the pandemic in March 2020,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. He noted that the improvement in current conditions and the short term outlook indicated that economic growth is likely to strengthen further in the coming months. Consumers outlook for business conditions improved significantly. The short term outlook also improved significantly with expectations for the job market improving. The outlook for incomes did not show as much confidence but was slightly improved.
Existing-home sales declined in February, following two prior months of gains. Single-family home sales decreased to a seasonally-adjusted annual rate of 5.52 million in February, down 6.6% from 5.91 million in January, and up 8.0% from one year ago. The median existing single-family home price was $317,100 in February, up 16.2% from February 2020. Sales in all four regions compared to February a year ago were up strong double digits in each of the regions.
“I still expect this year’s sales to be ahead of last year’s, and with more COVID-19 vaccinations being distributed and available to larger shares of the population, the nation is on the cusp of returning to a sense of normalcy,” Lawrence Yun, NAR’s chief economist said. “Many Americans have been saving money and there’s a strong possibility that once the country fully reopens, those reserves will be unleashed on the economy.”
Sales of new single-family houses in February 2021 were at a seasonally adjusted annual rate of 775,000. This was 18.2% below the revised January rate of 948,000, but was 8.2% above the February 2020 estimate. Sales compared to last year were up in the Midwest and South but declined in the Northeast and West.
Regionally, single family housing starts were up 19.4% in the Northeast and 38.4% in the West but were down 19.7% in the Midwest and 11.0% in the South.
Retail and food services in February sales showed a decrease of 3.0% from the previous month but were 6.3% above February 2020. Retail trade sales were up 9.5% above last year. Nonstore retailers were up 25.9% from February 2020.
Sales at furniture and home furnishings stores, on an adjusted basis, were up 8.9% over February 2020. Year to date, sales at these stores were up 7.7%.
Consumer Prices Index increased 0.4% in February on a seasonally adjusted basis after rising 0.3% in January. The gasoline index continued to increase, rising 6.4% in February and accounting for over half of the seasonally adjusted increase in the all items index. The food index rose 0.2% in February, with the index for food at home and the index for food away from home both rising.
Total nonfarm payroll employment rose by 379,000 in February, and the unemployment rate was little changed at 6.2%.
The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.2% in February to 110.5, following a 0.5% increase in January and a 0.4% increase in December. The report indicated that the economic growth should continue well into this year.
Our repeated conversations with industry contacts keep yielding the same issues and challenges: The need for people, raw materials, and imported finished goods. Shortages of integral materials to make foam, some lumber issues due to the increase in housing and upfits to homes, and other materials continue to have a negative impact. Glue for case goods is even in short supply. If those hurdles can be cleared and goods can actually be made either domestically or overseas, getting the goods delivered has been a big issue.
Price increases have really impacted business due to the considerable backlogs many are facing. In most cases, orders are placed based on current price lists, but by the time the goods can be made and shipped, the prices have gone up. It is hard for the manufacturers to absorb those increases, yet it is hard for the retailer to do the same and they certainly have issues with going back to customers trying to raise prices after the goods were ordered.
Most people we talk with say they can never remember business being this good, yet most admit they would have never imagined the challenges that have emerged in the midst of such positive growth.
We do expect business to slow a bit over the next few months. As travel and vacations start to resume, we imagine some of the purchasing power will dry up. We think it will still be positive but just not as robust. Hopefully, this will allow folks to take a breath and catch up somewhat. In the meantime, enjoy the good business as best you can.