Executive Summary

As we noted last month, the results of our survey of residential furniture manufacturers and distributors will be difficult to make much sense of due to the pandemic that began in March of 2020. March, April, and most of May results in 2020 were a mixture of complete and or partial shutdowns, or while some employees were put back on payroll due to the government assistance programs, there was little productive activity at most places. At least until we started to see some things come back in May.

We have provided some comparisons to the same periods from 2019 which continue to show that business has really not only picked back up from last year, but is also showing very positive results compared to 2019. New orders were up 239% over April 2020 and were up 73% over the first four months of 2020. Comparing to April 2019 results, April 2021 orders were up 30% and were up 36% for the four months ended April.

Shipments were up 196% in April versus April 2020 and up 39% year to date. Shipments in April 2021 were up 26% over April 2019 and up 18% year to date. Backlogs were up 266% over April 2020 and up 5% from March 2021. Backlogs are clearly too high as new orders continue to exceed shipments. While catching up somewhat, it will likely be a while before backlogs get back to more reasonable levels. Supply of materials, especially foam in the upholstery world, as well as labor shortages, are hurting upholstery manufacturers. Supply of finished goods imports have also slowed due to the COVID effects on sourcing countries, either shut down or just significantly behind in production. We will discuss pricing more in our Thoughts section.

Receivable levels continue to be in good shape for most. Most of what we hear is that up to now, receivable aging’s are very clean. We think compared to the April time period last year, most had begun to receive Paycheck Protection Program (PPP) funds and were able to use those to not only pay the employees but also to help with cash flow as businesses began to go back to work.

Inventory levels also appear in line and if anything, probably could be higher except for shortages of materials as well as serious container flow issues.

Employment results are really not all that meaningful for the April time period.

National

Consumer Confidence

The Conference Board Consumer Confidence Index® improved further in June, following gains in each of the previous four months. The Index now stands at 127.3 (1985=100), up from 120.0 (an upward revision) in May. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—rose from 148.7 to 157.7. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—improved to 107.0, up from 100.9 last month. The Index is now at the highest level since the start of the pandemic.

Housing

Single-family home sales dropped to a seasonally-adjusted annual rate of 5.08 million in May, down 1.0% from 5.13 million in April, and up 39.2% from one year ago. The median existing single-family home price was $356,600 in May, up 24.4% from May 2020.

“Home sales fell moderately in May and are now approaching pre-pandemic activity,” said Lawrence Yun, NAR’s chief economist. “Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first-time buyers out of the market.”

Sales in May were down compared to April in all regions except the Midwest, where they were up slightly. But all four regions reported significant increases over May 2020.

Sales of new single‐family houses in May 2021 were at a seasonally adjusted annual rate of 769,000, which was 5.9% below the revised April rate but was 9.2% above the May 2020 estimate. New privately-owned house sales were up from May 2020 by 57.6% in the Northeast, 28.4% in the Midwest, 3.1% in the South and 6.7% in the West.

Housing starts continued to improve compared to last May. With lumber for use in housing prices starting to fall, we may see some pick up in starts soon.

Other

U.S. retail and food services sales for May 2021 decreased 1.3% from the previous month, but were 28.1% above May 2020.

Retail trade sales were down 1.7% from April 2021, but up 24.4% above last year. Food services and drinking places were up 70.6% from last year. Sales at furniture and home furnishings stores in May 2021 were up 66.7% over May 2020 and up 49.5% year to date.  Comparing sales at these stores for the first four months of 2021 vs. the first four months of 2019, sales were up 14.7%.

The consumer price index increased 0.6% in May and was up 5% for the preceding 12 months. The index has been trending up every month since January, when the 12-month change was 1.4%. The index for all items less food and energy rose 3.8% over the last 12-months, the largest 12-month increase since the period ending June 1992. The energy index rose 28.5% over the last 12-months, and the food index increased 2.2%.

Total nonfarm payroll employment rose by 559,000 in May, and the unemployment rate declined by 0.3 percentage point to 5.8%. Notable job gains occurred in leisure and hospitality, in public and private education, and in health care and social assistance.

The Conference Board Leading Economic Index increased by 1.3% in May to 114.5 (2016 = 100), following a 1.3% increase in April and a 1.4% increase in March. The Conference Board now forecasts real GDP growth in Q2 could reach 9% (annualized), with year-over-year economic growth reaching 6.6% for 2021.

Thoughts

The June High Point Furniture Market seemed to be very successful for most. Many people commented that there were few tire kickers here, as most were writing orders. Some of the larger dealers that did a fair amount of business at Premarket did not come back, but those that did seemed to come to do business. If you sold to the design trade, you were busy.

The most prevalent discussions at market, other than about business being written, was what to do about pricing. Upholstery exhibitors were troubled by having 12 to 25 plus week deliveries in conjunction with prices of most materials going up. For example, how do you price goods for sale today that won’t be made for say 15 to 20 weeks? On the case goods side, the same pricing issues were there as well, with some price increases in finished goods, but also crazy container increases, even if you can get one. When some prices of materials are going up 4 to 6 times, wholesale prices have to follow suit.

We believe that one good thing that may be coming from these price increases and shortages is that many dealers are learning that they actually can sell goods at higher prices, even when they didn’t think they could. This proves again that the average consumer has no idea what a piece of furniture should cost to begin with.

How long will this great business last? We wish we knew, but it feels like it may last longer than we thought early on. For sure shipments will continue to grow as backlogs are worked down, but it feels like orders will continue to improve as consumers seem to really be into upfitting and redesigning the spaces they live in.