Executive Summary

As we have noted before, the comparisons of the key indicators from our survey of residential furniture manufacturers and distributors are somewhat difficult to make meaningful comments, since we are comparing to a period of time not seen before in any of our lifetimes. But we will continue to provide the results with the best comments we can.

Continuing to show very strong current business, new orders were up 47% in May 2021 over May 2020. The May 2020 results were just the beginning of a somewhat comeback. Year to date, the results remained very strong with orders up 67% over the first five months of 2020. Orders were up for 97% of the participants year to date.

We did compare the 2021 year to date results with that of our 2019 survey. This comparison showed new orders up 36% over the first 5 months of 2019. These results show that business really has continued to be positive since the beginning of the comeback from the basic shutdown of the economy in the March/April 2020 time frame.

Shipments were up 64% in May 2021 compared to May 2020 and up 43% year to date. Shipments were up for 97% of the participants year to date. Compared to the first five months of 2019, shipments were up 17% in 2021. Again, showing that business really has been good since the shutdown.

New orders continued to exceed shipments, so backlogs increased again in May, up 3% from April and reaching an increase of 214% over May 2020. There have been continued issues with lack of labor and acquiring raw materials, primarily foam for upholstery, as well as other raw material shortages. Also, issues with imports due to labor and other problems in countries where factories are not back up and running are keeping companies from being able to get backlogs down. Adding to those are problems with freight, whether it be lack of containers, port delays, or even trucking issues in the states. We see that the whole industry is just not able to keep up with the current demands for goods at the retail level.

Receivable levels remain in good shape, as with backlogs as they are, slow payers are not getting their goods in line to be made or shipped, so most companies are seeing their receivable ageings in good shape. Inventory levels continue to rise with demand, though if inventory items were available, one could justify even higher levels.

National

Consumer Confidence

The Conference Board’s Consumer Confidence Index report was about even in July with that of June. Lynn Franco, Senior Director of Economic Indicators at The Conference Board said “Consumers’ appraisal of present-day conditions held steady, suggesting economic growth in Q3 is off to a strong start. Consumers’ optimism about the short-term outlook didn’t waver, and they continued to expect that business conditions, jobs, and personal financial prospects will improve. Short-term inflation expectations eased slightly but remained elevated. Spending intentions picked up in July, with a larger percentage of consumers saying they planned to purchase homes, automobiles, and major appliances in the coming months. Thus, consumer spending should continue to support robust economic growth in the second half of 2021.”

Housing

Existing-home sales were up in June over May. Three of the four regions were up slightly with the fourth flat. In the year over year comparison, total existing-home sales in June were up 22.9% over June last year. Single family sales were up 19.3% from a year ago. Single family prices were up 24.4% over last year while condo and co-op sales were up 19.1%.

“Supply has modestly improved in recent months due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales,” said Lawrence Yun, NAR’s chief economist. At a broad level, home prices are in no danger of a decline due to tight inventory conditions, but I do expect prices to appreciate at a slower pace by the end of the year,” Yun said. “Ideally, the costs for a home would rise roughly in line with income growth, which is likely to happen in 2022 as more listings and new construction become available.”

Sales of new single‐family houses in June were 6.6% below the May rate and were 19.4% below the June 2020 rate. This decrease was likely due to the pent up demand to close on new homes likely pushing up sales more in 2020. Sales were down in all regions except the Midwest where they were up 7%.

Housing starts were up from May 6.3% and up 29.1% over last year. Completions were down slightly from May but were 6.5% above June 2020.

Other

U.S. retail and food services sales for June 2021 were up 0.6% from May and 18% above June 2020. Retail trade sales were up 0.3% from May 2021 and up 15.6% above last year. Clothing and clothing accessories stores were up 47.1% from June 2020 and food services and drinking places were up 40.2%. Sales at furniture and home furnishings stores in June 2021 were up 17.1% over June 2020 and up 43.0% year to date.

The consumer price index increased 0.9% in June after a 0.6% increase in May. The 0.9% increase was the largest since June 2008 when the index was up 1.0%. For the last 12 months, the all-items index increased 5.4%, the largest 12 month increase since a 5.4% increase for the period ended August 2008. The index for used cars and trucks was up 10.6% in June. The index for all items less food and energy was up 4.5% over the last 12 months, the largest 12 month increase since the period ended November 1991.

Total nonfarm payroll employment rose by 850,000 in June. The unemployment rate stayed at 5.9%. The Conference Board Leading Economic Index increased 0.7% in June following a 1.2% increase in May and a 1.3% increase in April. The report noted that the positive results indicated that strong economic growth will continue in the near term with a forecast of real GDP growth of 6.6% for 2021.

Thoughts

The industry continues to experience a strange duality of success with orders flowing in but also being mired in backlogs as product is not flowing out with various delays and supply issues. Manufacturers continue to have labor problems. We traveled through Hickory, NC in the last couple of days, and signs for help were everywhere, many of which were clearly advertising their increased hourly rates. But materials have also been a problem. The foam issues seem to be easing some, but there are issues with wood, plywood, metal, and some fabrics, among other things.

For importers, certain problems continue and some are very real issues. COVID has hit several countries very hard. Most recently, several facilities in Vietnam have been shut down for periods of time including several furniture facilities. In addition, container shortages, extreme price increases for containers (if you can get one), and continued issues at the ports create significant issues for importers.

For all, there are trucking and freight issues here in the U.S. Significant pricing issues persist, and prices have had to go up through regular price increases as well as surcharges for items such as freight that hopefully will level off again at some point. We’re intrigued that the consumer price index report noted that indexes for several items were up substantially, but household furnishings and a couple of other indexes were among the few component indexes that decreased. But there is a lot of talk about inflation in general with the fears that it could cause a slowdown in the economy. As with all other economic news, we struggle to determine media hype from reality.

We wish you good luck in swimming in these uncertain waters and a great rest of the summer!