Executive Summary

Once again, the results of our latest survey of residential furniture manufacturers and distributors were not very pretty, yet somewhat in line with expectations. For the month of November 2022, net new orders were off 35% compared to November 2021, in line with recent results for much of the year. But most of the recent comparisons have been to prior year results that were not that strong compared to 2020 results. When 97% of the participants report a decline in orders for the month, we think it’s safe to say that business is definitely off. Year to date, orders were down 34%, off for 94% of the participants.

Shipments were up only 1% over November 2021. Year to date, shipments remained up 6% over last year when they were up 23% over the prior year. With shipment dollars exceeding new orders, backlogs fell again, down 9% from October. Backlogs were now down 52% from a year ago when they were down 50% from November 2020.
We are continuing to hear from more that backlogs are getting to a point where long lead times are gone for many. This will eventually become an issue for many if new orders continue to slide, as shipments will begin to slow down.

Receivable and employee levels continue to appear to be in good shape. Inventories are too high, though some are intentional now as believers in just in time were hurt more than others so many are now carrying some excess for protection. Even so, overall inventories are too high, and coupled with retail inventories being too high; it will take some time to bring them down to more reasonable levels.

National

Consumer Confidence

The Conference Board’s Consumer Confidence Index decreased in January following an upwardly revised increase in December 2022. The Index now stands at 107.1 (1985=100), down from 109.0 in December. The Present Situation Index increased to 150.9 (1985=100) from 147.4 last month. The Expectations Index fell to 77.8 (1985=100) from 83.4 partially reversing its December gain. The Expectations Index is below 80 which often signals a recession within the next year.

“Consumer confidence declined in January, but it remains above the level seen last July, lowest in 2022,” said Ataman Ozyildirim, Senior Director, Economics at The Conference Board. “Consumer confidence fell the most for households earning less than $15,000 and for households aged under 35.”

The Expectations Index retreated in January reflecting their concerns about the economy over the next six months. Consumers were less upbeat about the short-term outlook for jobs. They also expect business conditions to worsen in the near term. Meanwhile, purchasing plans for autos and appliances held steady, but fewer consumers are planning to buy a home. Consumers’ expectations for inflation ticked up slightly from 6.6% to 6.8% over the next 12 months, but inflation expectations are still down from its peak of 7.9% last seen in June.

Housing

Existing-home sales fell for the eleventh consecutive month in December, with three of the four major U.S. regions recording month-over-month drops, while sales in the West were unchanged. All regions experienced year-over-year declines in the 30-plus percent range. The median existing single-family home price was $372,700 in December, up 2.0% from December 2021.

Sales of new single‐family houses in December 2022 were at a seasonally adjusted annual rate of 616,000, or 2.3% above the revised November rate of 602,000, but were 26.6% below the December 2021 estimate of 839,000. An estimated 644,000 new homes were sold in 2022. This was 16.4% below the 2021 figure of 771,000.

Privately‐owned housing starts in December were at a seasonally adjusted annual rate of 1,382,000 or 1.4% below the revised November estimate and 21.8% below the December 2021 rate. Single‐family housing starts in December were at a rate of 909,000 or 11.3% above the revised November. An estimated 1,553,300 housing units were started in 2022. This was 3.0% below the 2021 figure of 1,601,000.

Other

Advance estimates of U.S. retail and food services sales for December 2022, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were down 1.1% from the previous month, but up 6.0% above December 2021. Total sales for the 12 months of 2022 were up 9.2% from 2021. Total sales for the October 2022 through December 2022 period were up 6.7% from the same period a year ago.

Retail trade sales were down 1.2% from November 2022, but up 5.2% above last year. Non-store retailers were up 13.7% from December 2021, while food services and drinking places were up 12.1% from last year. Sales at furniture and home furnishings stores were up 0.3% from December 2021 and up 1% for the year. Sales for the year 2021 versus 2020 were up 26.4% so the 1% increase in 2022 was not too bad considering the comparison.

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1% in December on a seasonally adjusted basis, after increasing 0.1% in November. Over the last 12 months, the all-items index increased 6.5% before seasonal adjustment.

The index for gasoline was by far the largest contributor to the monthly all-items decrease, more than offsetting increases in shelter indexes. The food index increased 0.3% over the month. The energy index decreased 4.5% over the month as the gasoline index declined. The Conference Board Leading Economic Index® (LEI) for the U.S. decreased by 1.0% in December 2022 following a decline of 1.1% in November. The LEI is now down 4.2% over the six-month period between June and December 2022.

Thoughts

The current survey results continue to be difficult to make complete sense of since so many individual companies are in different places themselves. That, along with the other variables we have discussed before, continues to make “reading the tea leaves” hard to do.

There continue to be discussions as to recession or not. Many feel we are already in one and others say not yet, and even some say, probably will not be. We think in today’s environment, it is not only an industry-by-industry debate but probably more of a company-to-company debate. Some companies are likely in a recession right now. Others are starting to feel it, while others are concerned but due to the large backlogs that they had, are not really feeling it. It will likely be some time before whoever decides these things can make a call as to what and when we have. Very seldom has business been so good for so long, to then drop off this fast. But inflation was rising so fast due to the demands, it started affecting more than just the cost of raw materials. Gas prices soared. Then freight and wages; then food down to eggs. Just a lot of things seemed to get out of control all at once. So, while it will take some time to sort it all out, we are hopeful that this bump that we are in turns into the so-called soft landing and things can take off smoothly again.
In the meantime, we continue to suggest that plans be made for several what-if scenarios so that as they play out whichever way, you have somewhat of a plan in place to deal with whatever comes your way.

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