Executive Summary

We continue to struggle with the category comparisons, as the changes in levels of the pandemic and numbers of people affected by the virus continued to change from one year to the next. In the January to January comparisons, new orders were down 12% from January 2021, but January 2021 orders were up 27% over January 2020. So January 2022 new orders were up 16% over January 2020. In addition, even with the 12% decline in overall orders in the January 2022 comparisons to the January 2021 results, some 55% of the participants reported increased orders for the month.

Shipments were down 3% from January 2021. But January 2021 shipments were up 7% over January 2020. Backlogs increased 1% over December making backlogs up 43% over January 2021. January 2021 backlogs were up 177% over January 2020 so backlogs continue to increase, though slightly.

Receivable levels continue to be in good shape and as we work with clients, we are seeing this in the ageings. Most customers are staying current or very close to it. We know the PPP loan money has helped customers to do this. We just hope the goods can get shipped as soon as possible. Inventory levels have been built back for the most part, hopefully with the right mix of raw materials and or finished goods.

Once again, the number of factory and warehouse employees has grown slightly, but not to the degree they need to grow. Payrolls have also grown with not only a few more people but also higher wages.

National

Consumer Confidence

The Conference Board Consumer Confidence Index® increased slightly in March, after a decrease in February. The Index now stands at 107.2 (1985=100), up from 105.7 in February. The Present Situation Index improved to 153.0 from 143.0 last month. However, the Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—declined to 76.6 from 80.8.

Lynn Franco, Senior Director of Economic Indicators at The Conference Board said “The Present Situation Index rose substantially, suggesting economic growth continued into late Q1. Expectations, on the other hand, weakened further with consumers citing rising prices, especially at the gas pump, and the war in Ukraine as factors. Meanwhile, purchasing intentions for big-ticket items like automobiles have softened somewhat over the past few months as expectations for interest rates have risen.”

“Nevertheless, consumer confidence continues to be supported by strong employment growth and thus has been holding up remarkably well despite geopolitical uncertainties and expectations for inflation over the next 12 months reaching 7.9%—an all-time high. However, these headwinds are expected to persist in the short term and may potentially dampen confidence as well as cool spending further in the months ahead.”

Housing

Existing-home sales fell slightly in February from January and compared to February 2021; sales were down in all regions except the South. The report indicated that continued rising prices, as well as increasing mortgage rates, were slowing down the activity. According to the report, “Monthly payments have risen by 28% from one year ago – which interestingly is not a part of the consumer price index – and the market remains swift with multiple offers still being recorded on most properties.”

Sales of new single‐family houses in February 2022 were 2.0% below the revised January rate of 788,000 and were 6.2% below the February 2021 estimate of 823,000. Sales were down in all regions except the Northeast where they were up 7.5% compared to February 2021.

Privately‐owned housing starts in February were up 6.8% above the January estimate and were 22.3% above the February 2021 rate.

Single-family starts compared to February last year were up 13.7% with starts up 17.4% in the Northeast, 39.8% in the Midwest, and 18.4% in the South, but down 5.1% in the West.

Other

Advance estimates of U.S. retail and food services sales for February 2022 increased 0.3% from the previous month, and 17.6% above February 2021. Retail trade sales were virtually unchanged from January 2022, but up 15.9% above last year. Gasoline stations were up 36.4% from February 2021, while food services and drinking places were up 33.0% from last year. Sales at furniture and home furnishings stores were up 7.4% over February 2021 and up 4.4% year to date on an adjusted basis.

The Consumer Prices Index increased 0.8% in February after rising 0.6% in January. Over the last 12 months, the all-items index increased 7.9% before seasonal adjustment. Increases in the indexes for gasoline, shelter, and food were the largest contributors to the increase. The gasoline index rose 6.6% in February and accounted for almost a third of the all-items monthly increase. The food index rose 1.0% as the food at home index rose 1.4%; both were the largest monthly increases since April 2020. The energy index rose 25.6% over the last year, and the food index increased 7.9%, the largest 12-month increase since the period ending July 1981.

“The US Leading Economic Indicators rose slightly in February, partially reversing January’s decline,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “However, the latest results do not reflect the full impact of the Russian invasion of Ukraine, which could lower the trajectory for the US LEI and signal slower-than-anticipated economic growth in the first half of the year. The global economic impact of the war on supply chains and soaring energy, food, and metals prices—coupled with rising interest rates, existing labor shortages, and high inflation—all pose headwinds to US economic growth. While the Omicron wave and its economic impact waned in recent months, the potential for new COVID-19 variants remains. Amid these risks, The Conference Board revised its growth projection for the US economy down to 3.0% year-over-year GDP growth in 2022—still well above the pre-pandemic growth rate, which averaged around 2%.”

Thoughts

From what we can tell, most of our participants as well as others we talk with are continuing to see some growth but clearly at some more manageable levels. The problem seems to be making enough dents in the backlogs. The lack of employees continues to be a real issue. Add to that the continued issues with freight and other supply chain issues, these times are tough for most to continue to provide good service to customers at the wholesale as well as the retail levels.

Throw in some significant inflation issues (aka price increases), the turmoil in Ukraine and Russia, more virus issues especially in foreign countries, and it really is making things difficult. We have said it before, but I am not sure many would ever have believed that business could be as good as it is from an order standpoint yet being this difficult to deal with.

In spite of the issues mentioned and more not yet covered, consumer confidence remains at fairly high levels and most believe that the economy in the U.S. is still reasonably strong.

We start the High Point Market in a couple of days (ok we know it has been started for a few already). It will be interesting to hear what folks are seeing and feeling in the real world when they are at home. We still think market will be reasonably good as even though much of last market orders may not have yet been shipped, there is still need for new products on the floors or online as there continues to be need out there. Good luck while here finding some new ideas to take back home with you. Safe travels.