Executive Summary

As we have seen recently, the results of our survey of residential furniture manufacturers and distributors have continued to need some explanation. In November, new orders were basically flat with November 2020, making one think that things were slowing down. But when we look deeper, November 2020 orders were up 17% over November 2019 so that would indicate that incoming business remains at strong levels. In fact, some 68% of the participants reported increased orders for the month. Year to date, orders were up 16% over the same period last year when they were up 14% over the first 11 months of 2019.

Shipments were up 3% over November 2020 and up 23% year to date. Last year at this time, shipments were down 7% due to the early month shutdowns. Supply chain, labor, freight, and import issues continue to slow the ability to ship. As order dollars exceeded shipment dollars again, backlogs increased 2% over October and were up 50% over November 2020. November 2020 backlogs were up 148% over November 2019 so backlogs just keep getting worse.

Receivable and inventory levels seem in order except for some issues with customer deposits netted against receivables causing them to look low, but with backlogs so large, these deposits continue to grow as a percent causing some participants to report negative receivable levels.

Factory and warehouse employees continue to be a serious issue, as they are in most all industries. Payrolls were up quite a bit year to date, but that would make sense as last year was affected by the shut down early in the year. Payrolls are affected also by increased wage rates as companies are having to pay more for people to either get them or keep them.

National

Consumer Confidence

Conference Board Consumer Confidence Index® declined in January, after an increase in December. The Index now stands at 113.8 down from 115.2 in December. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—improved to 148.2 from 144.8 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—declined to 90.8 from 95.4.

Lynn Franco, Senior Director of Economic Indicators at The Conference Board said “The Present Situation Index improved, suggesting the economy entered the new year on solid footing. However, expectations about short-term growth prospects weakened, pointing to a likely moderation in growth during the first quarter of 2022. Nevertheless, the proportion of consumers planning to purchase homes, automobiles, and major appliances over the next six months all increased.”

Housing

Existing-home sales fell overall in December 2021 compared to November 2021 and December 2020, but the December 2020 sales were up substantially over December 2019 so the decline was really not very much. Overall, the sales for the year were up 8.5% with all regions of the country up for the year.

Once again, the report indicated that sales were likely to level off into 2022 due partially to higher mortgage rates and that price increases would likely fall back into more normal increases of 3 to 5%.

New residential sales were down December to December but mixed among the regions. Overall, sales were down for the year 7.3% causing more pricing pressure for existing-home sales.

Housing starts were up slightly in December and up 15.6% for the year but were down 10.6% from December 2020. Starts were down in all four regions.

Other

U.S. retail and food services sales for December 2021 were down 1.9% from November, but 16.9% above December 2020. December 2020 sales were up 2.9% over December 2019. Total sales for the 12 months of 2021 were up 19.3% from 2020 when they were up 0.6% over 2019 after a shutdown in early 2020.

Retail trade sales were down 2.1% from November 2021, but up 14.4% above last year. Gasoline stations were up 41.0% from December 2020, while food services and drinking places were up 41.3% from last year. Sales in December at furniture and home furnishings stores were up 11.1% over December 2020. Year to date, sales at these stores were up 26.4% over 2020.

On a negative note, the Consumer Price Index increased 0.5% in December after rising 0.8% in November. Over the last 12 months, the all items index increased 7.0%.

Increases in the indexes for shelter and for used cars and trucks were the largest contributors to the all items increase. The energy index declined in December, ending a long series of increases falling 0.4% as the indexes for gasoline and natural gas both decreased.

The Conference Board Leading Economic Index® (LEI) for the U.S. increased by 0.8% in December, following a 0.7% increase in November and a 0.7% increase in October. The report said “The U.S. LEI ended 2021 on a rising trajectory, suggesting the economy will continue to expand well into the spring. For the first quarter, headwinds from the Omicron variant, labor shortages, and inflationary pressures—as well as the Federal Reserve’s expected interest rate hikes—may moderate economic growth. “

Real gross domestic product (GDP) increased at an annual rate of 6.9% in the fourth quarter of 2021, according to the “advance” estimate. In the third quarter, real GDP increased 2.3%.

Thoughts

As we have stated the last several months, comparisons are difficult currently. We believe it may be 2024 before we get back to normal comparisons given the uncertainty of the pandemic. While there has been some easing of supplies in some cases, there continue to be numerous issues with supply chain dynamics, labor shortages, and freight challenges, both domestic and international. Some container prices seem to have eased but that may change again when Chinese New Year ends and other countries open back up from COVID shutdowns.

Another factor in our comparisons is price increases. Wholesale prices to customers have increased significantly, as have prices of raw materials and imports. We are seeing significant double-digit price indexes for LIFO calculations (not to get technical, but this means prices this year compared to prices last year end). Since we use dollars for our comparisons, it is clear that the percent dollar increases are not the same as percent of pieces sold.

In spite of all the negative issues in the news, most economic reports appear to be favorable for good conditions into 2022.

Now as we hit winter months and weather becomes an issue at all levels, we will all look for spring with hopes of a significant slowdown in COVID cases, etc. and good weather to get us out of the winter doldrums. We know many of you love cold weather as you would not live in cold climates if not, but some of us just do not. Me included.