Executive Summary

As we noted last month, the results of our surveys have been somewhat difficult to compare due to all the changes that really began in March 2020. So we will comment mostly on what the results show. There are many factors that we cannot tell from the numbers themselves and the related impacts.

As we expected, orders in March were down, some 26% compared to March 2021 according to our most recent survey. March 2021 orders were not comparable to March 2020. Comparing March 2022 to March 2019, orders were up about 5%, some of which probably reflects price increases that were made throughout 2021 and into 2022.

Year-to-date orders were down 21%. Orders were down for 79% of the participants for both the monthly and year-to-date comparisons.

Shipments were up 19% over March a year ago and finally began to reduce backlogs. Shipments were up 4% year to date. Some 76% of the participants reported increased shipments year to date, a good thing as shipments drive eventual cash. As shipments exceeded orders, backlogs fell 4%. Backlogs were still 20% ahead of last year when they were very high at that time.

Receivable levels continue to appear to be in good shape as most receivable ageings are in very good shape. Inventory levels continue to rise, along with the growth in business as well as a hedge against shortages. But they are probably high enough, considering expectations for business to slow as the economy and consumer confidence declines.

National

Consumer Confidence

The Conference Board’s Consumer Confidence report was not available at the time of issuing this report.

The University of Michigan Surveys of Consumers noted that consumer sentiment dropped 9.4% from April reversing gains recording in April. The declines were broad-based across current conditions as well as expectations. Consumer assessments of their current financial situation relative to a year ago were at the lowest reading since 2013. Buying conditions for durables reached their lowest reading since the question began appearing on the monthly surveys in 1978, again primarily due to high prices.

Housing

Existing-home sales fell for the third straight month with sales by regions mixed. Sales rose in the Northeast and Midwest while falling in the South and West. Sales were down compared to last year in all four regions.

“Higher home prices and sharply higher mortgage rates have reduced buyer activity,” said Lawrence Yun, NAR’s chief economist. “It looks like more declines are imminent in the upcoming months, and we’ll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years.”

New residential sales also fell 16.6% from March and were down 26% from last April. Single-family starts also fell from March.

Other

Advance estimates of U.S. retail and food services sales for April 2022 increased 0.9% from the previous month and were 8.2% above April 2021. Total sales for February 2022 through April 2022 period were up 10.8% from the same period a year ago.

Retail trade sales were up 0.7% from March 2022 and up 6.7% above last year. Gasoline stations were up 36.9% from April 2021, while food services and drinking places were up 19.8% from last year. We would bet gas prices being up, not necessarily gallons, caused most of the gas station increase.

Sales at furniture and home furnishings stores were up 0.8% over April 2021 and up 2.3% year to date. Sales in April 2021 were up almost 20% over sales in 2019 so the smaller increase was still a good month.

Thoughts

It continues to be difficult to deal with the results of our survey as well as the national reports. For example, the report on retail sales for April for furniture and home furnishings stores showed an 0.8% increase in sales for the month. But sales in April 2021 were up 20% over sales in 2019. But if you do not look back at the data, the national report looks rather weak. We have the same issue with some of our survey results.

Now the question is, where are we now. The shutdowns in Asia due to the COVID issues there have cut back production and shipments from there to the U.S. allowing U.S. ports to begin to catch up on clearing the ships and warehouses here. That is helping with the flow of goods here to catch up some of the backlogs, but that is just as the economy here is slowing. Inflations, gas prices, declines in the stock market, increased mortgage rates, and rents, along with other issues are beginning to make consumers think before spending on durable goods.

We, along with most, have been expecting business to slow from the last two years of great business but we wonder how all of the national issues will slow business more than we expected. Most are fortunate to have substantial backlogs to help get through this period and provide better service to customers, but if this should turn into a real recession, how long will the backlogs last?

We will leave the Russia/Ukraine issues out of this discussion, but we also know that there is significant impact on much more than just the war. Not that the war is not more than enough to worry about.