Executive Summary

As can be seen in the details in the back section of the newsletter, the numbers continue to be difficult to analyze. Clearly, business has slowed and, call it a recession or not, most we talk with believe the industry is in the grasp of one. The continued impact of cancellations and cleanup of backlogs really has made the results of new orders difficult. Year-to-date, net new orders were down 29% while for the same period a year ago, orders were up 29%.

Shipments continue to help as backlogs are worked down but many we have talked with are concerned that they have worked the levels down to a point, that they may not be able to count on backlogs too much longer. There are many out there that still have multiple-week delivery times, but more and more at market we heard of getting deliveries back in the 12-to-14-week time frames. As business continues to slow, shorter lead times will become an issue. While one can say that a 10-to-12-week delivery is more normal, that is the case when orders are coming in at a normal rate, but this is not true for all.

Inventories continue to be high which is an issue. In many cases, we are hearing that some of this issue relates not to having too much inventory but not the right mix of saleable product. This is somewhat true at the wholesale and retail levels.

National

Consumer Confidence

The Conference Board’s Consumer Confidence Index decreased in October after back-to-back monthly gains. The Index fell to 102.5, down from 107.8 in September. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—declined sharply to 138.9 from 150.2 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—declined to 78.1 from 79.5.

“Consumer confidence retreated in October, after advancing in August and September,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The Present Situation Index fell sharply, suggesting economic growth slowed to start Q4. Consumers’ expectations regarding the short-term outlook remained dismal. The Expectations Index is still lingering below a reading of 80—a level associated with recession—suggesting recession risks appear to be rising.”

“Notably, concerns about inflation picked up again, with both gas and food prices serving as main drivers. Vacation intentions cooled; however, intentions to purchase homes, automobiles, and big-ticket appliances all rose. Looking ahead, inflationary pressures will continue to pose strong headwinds to consumer confidence and spending, which could result in a challenging holiday season for retailers.”

Housing

Existing-home sales descended in September, the eighth month in a row of declines. Three out of the four major U.S. regions were down month-over-month, while the West held steady. On a year-over-year basis, sales dropped in all regions.

Single-family home sales declined 0.9% from 4.26 million in August and down 23.0% from the previous year. The median existing single-family home price was $391,000 in September, up 8.1% from September 2021.

“The housing sector continues to undergo an adjustment due to the continuous rise in interest rates, which eclipsed 6% for 30-year fixed mortgages in September and are now approaching 7%,” said NAR Chief Economist Lawrence Yun. “Expensive regions of the country are especially feeling the pinch and seeing larger declines in sales.”

New privately owned houses sold in September were down 17.8% overall but varied between regions with sales up in the Northeast and Midwest and sales down in the South and West.

Other

Real gross domestic product (GDP) increased at an annual rate of 2.6% in the third quarter of 2022, according to the “advance” estimate released. In the second quarter, real GDP decreased 0.6%. Reading the details, the report showed considerable variations in the causes of the increase, with numerous factors offsetting increases. See details later in the report.

Advance estimates of U.S. retail and food services sales for September 2022, were virtually unchanged from the previous month, but 8.2% above September 2021. Total sales for the July 2022 through September 2022 period were up 9.2% from the same period a year ago.

Sales at furniture and home furnishings stores were up 0.9% over September 2021 and up 2% year to date through September. Keep in mind that sales at these stores year-to-date were up 32% over the first 9 months of 2020.

The Consumer Price Index (CPI-U) rose 0.4% in September on a seasonally adjusted basis after rising 0.1% in August. Over the last 12 months, the all-items index increased 8.2%. Increases in the shelter, food, and medical care indexes were the largest of many contributors to the monthly seasonally adjusted all items increase.

Total nonfarm payroll employment increased by 263,000 in September, and the unemployment rate edged down to 3.5%. Notable job gains occurred in leisure and hospitality and in health care.

Thoughts

We felt very positive after the time we spent at the High Point Market. The “Buzz” was described by many as being as close to normal as it has been since the pandemic started. While not true for all, there was a significant amount of optimism among both exhibitors and buyers. Apparently, some of the lower-end folks were not as optimistic as others, but overall, the market seemed good. Many noted that retailers were looking for fresh ideas that could be bought in reasonable time frames versus having to buy what they thought they could get delivered the fastest. While sometimes it was a very good idea when good stock was available, sometimes that led to buying goods that may not have been as saleable at retail.

While the positive GDP news was good and helped with some of the negative recession talks, much of the news reports were not as positive as the components of the good news were not as positive overall. Higher interest rates are still a drag on much of the spending of consumers. Whether the economy is in a recession or not, clearly parts of the economy are. We think the same is true for furniture. Not all segments are recovering as fast as others.

We hope you had a good market. We also hope that over the next few months we are able to make more sense of the results of our surveys, but with all the changes in pricing especially freight and container costs, it may be a while.

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