Executive Summary

This report along with the next couple of month’s reports, will definitely be a little different from our normal narratives and comments. As with most of the national news, the next couple of month’s furniture related results will not be very easy to make many comparisons. Where possible, at least for the furniture manufacturers and distributors, we will likely attempt to compare to the same month of 2019. With business as it has been since March of 2020, it may take some time before comparisons get back to normal.

According to our latest survey of residential furniture manufacturers and distributors, new orders in March 2021 were up 96% over March 2020. Since the pandemic really began to be felt in March 2020, part of the increase was due to many businesses being shut down for a while in March. So we compared March 2021 to March 2019 and saw that orders were up 40% in that comparison. Our perception that business has really been good showed up in those results.

Shipments were up 34%. While still not up with orders, at least shipments seem to be catching up somewhat. Last month, shipments were up 18% over February last year. As orders once again exceeded shipments in dollars, backlogs continued to grow, increasing 6% over February 2021 and up 251% over March 2020.

Receivable levels continue to be in good shape. We think most are keeping current in order to stay on the list of “good” customers with a better chance of getting shipments. And as we have said before, the Paycheck Protection Program money has really helped many dealers with their cash flow. Inventories continue to climb as material purchases are improving and imported goods are coming back slowly.

The employment situation is really difficult for most, especially where there are pockets of a number of manufacturers in the same area, such as the Piedmont of NC and sections of Mississippi. Payrolls in March were 10% higher than March 2020 but again the effect of the pandemic last year skews the results.

National

Consumer Confidence

The Conference Board Consumer Confidence Index® held steady in May, following a gain in April. The Index now stands at 117.2 (1985=100), down from 117.5 in April. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased from 131.9 to 144.3. However, the Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—fell to 99.1 in May, down from 107.9 last month. 

The report indicated that economic growth remains robust in Q2, but overall optimism retreated due to lower expectations for growth and a softer labor market, concerns over income expectations and rising inflation.

The University of Michigan preliminary report noted a drop in confidence due to higher inflation and lower income expectations.

Housing

Existing home sales compared to the previous month fell for the third straight month in all four regions. Yet, all four regions posted significant double-digit growth over April 2020, up 33.9%. Single family home sales reported similar results. The median single family home price increased 20.3% over April 2020.

Low inventories remained an issue, but expectations were that more inventory may come as people are more willing to open up their homes for showings as more vaccinations are given. More inventory was noted as being needed to reduce the price pressures that are driving the price increases. Properties typically sold in 17 days.

Sales of new single‐family houses in April 2021 were at a seasonally adjusted annual rate of 863,000. This was 5.9% below the revised March rate of 917,000, but was 48.3% above the April 2020 estimate of 582,000. Again, comparisons to April 2020 were somewhat meaningless but were up substantially in all four regions.

Housing starts were 9.5% below March 2021 but up substantially over April 2020 as would be expected.

Other

Retail sales in April were about even with March but up substantially over April 2020 – up 51.2%. Sales at furniture and home furnishings stores were up 196.4% over April 2020 and up 45.3% year to date. To give an idea of how drastic some of the comparisons were, clothing and clothing accessory stores were up 726.8% from April 2020, as most were shut down in April.

The consumer price index increased 0.8% in April after a 0.6% increase in March. The all-items index increased 4.2% in the last twelve months, the largest 12 month increase since a 4.9% increase for the period ended September 2008. The index for used cars and trucks rose 10.0% in April. This was the largest increase since the series began in 1953. The index for all items less food and energy rose 0.9% in April, the largest increase since April 1982.

Total nonfarm payroll employment rose by a disappointing 266,000 in April leaving the unemployment rate at 6.1%. Gains were noted in leisure and hospitality, other services and local government education.

The Conference Board Leading Economic Index increased 1.6% in April after a 1.3% increase in March. The report indicated that the economy’s upward trend should continue and growth could even accelerate in the near term.

Thoughts

Our survey finally starts reflecting the lack of comparability to the prior year due to the pandemic. It will likely be some time before reasonable comparisons can be made again. But overall, orders have been really good for most in the industry. We did some comparisons of March 2021 to March 2019 and those results were very favorable.

As we have had discussions with industry contacts, it seems that for once the industry has performed at or above most others for maybe one of the first times in recent history. Yet all of a sudden, so many issues have come up to cause serious problems. Cost increases from materials, lack of foam, lack of people in manufacturing, cost increases on imported product, bad product flow due to COVID in other countries and soaring freight costs have dampened some of the jubilance of good order writing.

But most have agreed that it is a much better problem to have than lack of orders. Yet it has been very frustrating for most to not really feel that they are reaping the benefits of this increased business. Add to that the issues with how to set pricing when taking an order, when shipping is delayed by many months and costs continue to rise.

Then what to do about the High Point Market? Some have chosen not to show but to focus on catching up on their customer shipments. Others feel the need to show. Who would have thought such demand for the industry products could cause such headaches?  We hope this short-term pain will result in long-term gains and profit realization down the road.