Executive Summary

Once again, as has been the case since the beginning of the pandemic, the raw numbers have to be explained. The results of our survey of residential furniture manufacturers and distributors showed some interesting comparisons. For instance, new orders in August were down 14% from August 2020. At first glance, alarm bells rang, but then we looked to see what August 2020 results showed. Oh, a 51% increase over August 2019. So, then we looked at August 2021 compared to August 2019 and we saw that orders were up 30% over that period. Year to date, new orders were up 29% and up 35% over the same period of 2019. Based on those results, we turned off the alarm.

So, the story continues as each comparison these days, requires a “but see” comparison, as we see with shipments. Shipments were up 10% in August versus August 2020 and up 34% year to date. Shipments were up 14% over August 2019. August 2021 shipments were up for some 91% of the participants.

It is hard to think of backlogs as a big problem, but they have become a major issue for most. Backlogs rose again in August, up 3% as orders in dollars exceeded shipments once again. Backlogs were up 81% over August 2020 when they were up 102% over August 2019.

Receivable levels continue to make sense compared to shipments, and in conversations, it appears that most dealers have been able to stay pretty current. Of course, they must, as to get product, they need to stay current. Inventory levels were up 43% over last August. The issue now is more of what the inventory is versus how much in dollars one has. For instance, it doesn’t matter if you have the fabric in stock, if you don’t have twine for the 8-way hand tied. While that may seem far-fetched, we heard that story.

As for factory and warehouse employees, that is just one more of the stories of need. According to the survey, the number of factory and warehouse employees was up 6% over last August, but that, according to most, was not nearly enough. The need for workers is up and down the line as suppliers of materials to manufacturers need people as well. And truck drivers are needed as well as dock workers. The shortage of workers in the country is a major issue.

National

Consumer Confidence

Consumer confidence improved in October, reversing a three-month downward trend as concerns about the spread of the Delta variant eased,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “While short-term inflation concerns rose to a 13-year high, the impact on confidence was muted. The proportion of consumers planning to purchase homes, automobiles, and major appliances all increased in October—a sign that consumer spending will continue to support economic growth through the final months of 2021. Likewise, nearly half of respondents (47.6%) said they intend to take a vacation within the next six months—the highest level since February 2020, a reflection of the ongoing resurgence in consumers’ willingness to travel and spend on in-person services.”

Housing

Existing-home sales were up in September after falling last month, but compared to September 2020, sales were down. Regionally, all four regions were up versus August, but all but the South were down from last year. The South was even with last year. Single-family home sales were down slightly more as condo and co-op sales were up slightly.

New residential sales in September were up from August but down from September last year. Compared to last year, sales were down in all regions except the Northeast.

Housing starts were down slightly from August but up 7.45% over last September. Single family starts though were down 2.3%.

Other

The advance report on retail and food services sales was positive again with sales up over September 2020 13.9% and up 14.9% for the quarter end September 2021. Sales at furniture and home furnishings stores were up 13.4% and up 32% for the year to date. The year to date was pretty much even with Gasoline stations and Sporting goods, hobby, musical instruments and books stores, though trailing Clothing and clothing accessories which were up 58.2% year to date.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4% in September on a seasonally adjusted basis after rising 0.3% in August. Over the last 12 months, the all-items index increased 5.4% before seasonal adjustment.  It would be interesting to know what an index would show for just the residential furniture industry but my bet is that it would be considerably more than the overall 5.4% increase.

Non-farm employment rose by 194,000 in September and the unemployment rate fell by 0.4% to 4.8%.

“The U.S. Leading Economic Index (LEI) rose again in September, though at a slower rate, suggesting the economy remains on a more moderate growth trajectory compared to the first half of the year,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “The Delta variant, rising inflation fears, and supply chain disruptions are all creating headwinds for the US economy. Despite the LEI’s slower growth in recent months, the strengths among the components remain widespread. The Conference Board continues to forecast strong growth ahead: 5.7% year-over-year for 2021 and 3.8% for 2022.”

Thoughts

We just finished off another High Point Market and we would say that overall, the results were positive, especially since there was some trepidation coming in. The mood seemed very good in spite of all the delivery issues. Most seemed to have an attitude of focusing on making the best of a market season that is admittedly challenging. Orders were written, lots of designers were here, the big folks came early, and it was business as usual, though maybe not by the numbers all would have wanted. Noticeably absent but expected was the lack of the typical international vistor representation.

One company had asked me to speak about what was going on outside their company, so I did an unscientific survey of folks attempting to cover several issues they asked me to talk about. What we came up with was, at first, we had the issues with COVID, then lack of employees both domestic and foreign, and then the foam shortages. Then when foam was available, there were not enough employees to fill the need for cutting foam for cushions. Then prices started rising for other materials. Freight? Oh, that caused issues from lack of truckers, boats, containers, dock workers, container prices, and the list just went on and on. There were even issues with the ability to get twine and cotton. Then to top off the list, several Asian countries had a run of COVID and basically shut the whole country down. Imports from those countries just shut down.

So much of the conversation was pretty easy. When can you ship? The answer was 12, 20, 30, 40 weeks or more. Pretty much all those numbers were used as well as in between. The other question that we asked of most everyone was, if we had told you two years ago that business in the industry would be this good, how many would have realized that there would be this many problems. But we always came back to it is a lot better than 2008 when we didn’t know who would survive.

There were questions as to how much longer this good business will last. The answers we got were probably through 2021, some said through 2022, some through 2023 while others said it will fall off quickly. If anyone figures it out, please let us know. We will be happy to share.