According to our latest survey of residential manufacturers and distributors, the new orders continued to flow in at very strong rates. New orders in February were up 34% over February 2020, marking the 9th straight month of large double-digit percentage increases. New orders were up for 94% of the participants so it appears that most companies are enjoying the good written business. The February results will likely be the last of the real comparisons as in March we will compare to the beginning of the COVID shutdown period. It will likely be June or later before we start seeing meaningful comparisons and even then, the surge in orders that we have seen since June, will probably make even more difficult comparisons.
There was some good news finally with shipments in that they were up 18% over February 2020 and were now up 13% year to date. Finally, we will start to see all these new orders start to convert to real dollars. Shipments were up for 81% of the participants in February.
Once again though, new orders exceeded shipments, so backlogs grew again, up 5% over January and a whopping 184% over February 2020. Who would have thought that we would ever complain that backlogs could be too high, but in many cases, there is fear that orders may start being cancelled, if not already. The one thing that is probably helping with customer patience is that the same thing is happening with many other products such as appliances, glass and other household products.
Receivable levels continue to be in good shape for the most part and we are seeing that with clients when we complete the audits. Inventory levels are building as they should with orders up, so the 15% increase over last year levels is really not a concern.
The number of factory and warehouse employees remains too low for the need, but getting workers has become a major issue for so many. There are still too many people that see no need to work when they can get as much or almost as much from government programs and not have to work. This issue is hitting so many industries.
The Conference Board Consumer Confidence Index® rose sharply again in April, following a substantial gain in March. The Index now stands at 121.7 (1985=100), up from 109.0 in March. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—soared from 110.1 to 139.6. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—rose moderately, from 108.3 last month to 109.8 in April.
The report indicated that the economic recovery has continued into the second quarter. The index in April was at the highest level since February 2020, back when we had no idea what was coming in March. The University of Michigan report was also very favorable. See the full report in the Deeper Dive Section.
Existing-home sales in March fell 3.7% from sales in February as sales in all regions declined. Sales were up 12.3% from March 2020. The median existing home sales price rose by a record breaking annual pace of 17.2% to $329,100. All four regions of the country posted double-digit growth from last year. As of the end of March, housing inventory rose slightly from February but was down 28.2% from March 2020. Properties typically sold in 18 days, a record low.
“Consumers are facing much higher home prices, rising mortgage rates, and falling affordability, however, buyers are still actively in the market,” said Lawrence Yun, NAR’s chief economist. He noted “The sales for March would have been measurably higher, had there been more inventory. Days-on-market are swift, multiple offers are prevalent, and buyer confidence is rising.”
Sales of new single-family houses in March 2021 were at a seasonally adjusted annual rate of 1,021,000. This was 20.7% above the revised February rate of 846,000 and was 66.8% above the March 2020 estimate. New home sales were up from March 2020 by 108.7% in the Northeast, 78.4% in the Midwest, 90.1% in the South but down 2% in the West.
Housing starts were up 19.4% above the February estimate and 37.0% above March 2020. Single family starts were up 40.7% over March 2020 with single family starts up 55.2% in the Northeast, 98.3% in the Midwest, 38.6% in the South and 13.5% in the West.
Retail and food services sales for March 2021 were up 9.8% from February and 27.7% from March 2020, the start of the pandemic. Retail trade sales were up 9.4% and up 26.9% from March 2021. Food services and drinking places were up 36.0% from last year.
Sales at furniture and home furnishings stores were up 46.8% from March 2020 and up 20.4% year to date. Obviously, March 2020 marked the start of the COVID-19 epidemic.
The consumer price index increased 0.6% in March after a 0.4% increase in February. The March 1-month increase was the largest rise since a 0.6% increase in August 2012. The gasoline index was up 9.1% and accounted for about one-half of the overall increase. One might think that the furniture industry cost increases would have accounted for the other half, but that was not mentioned in the report, at least not specifically.
Total nonfarm payroll employment rose by 916,000 in March, and the unemployment rate edged down to 6.0%. Job growth was widespread in March, led by gains in leisure and hospitality, public and private education, and construction.
The Conference Board Leading Economic Index® (LEI) for the U.S. increased 1.3% in March to 111.6 (2016 = 100), following a 0.1% decrease in February and a 0.5% increase in January. The improvement in the U.S. LEI, with all ten components contributing positively, suggests economic momentum is increasing in the near term, according to the report.
We have had several conversations with industry executives that almost always end up with frustrations of how good business is in terms of orders coming and yet how difficult it is to either not be able to get foam or workers, or deal with significant price increases when prices were quoted before the material cost increases came into effect. Or orders are great but cannot get product out of Asia. Or the cost of containers, if you can get them, have quadrupled or more.
It seems that no one would have thought that, for once, business in the furniture industry could be this good with consumer demand this high, yet so many problems have developed to make it hard to appreciate how good business is.
It will be interesting to see how business develops over the summer as restrictions are released and consumers are free to travel and move about more. Will the focus on the home change, or will we see this focus remain for the next year or two or more?
As we finish this edition, all we hear from premarket is that business is brisk with attitudes very good. There appear to be lots of people here in High Point with lots of excitement over product.
Stay safe and get vaccinated if that is your choice. Hopefully, we can all get a little bit closer to normal (whatever that may be) every day that goes by.