Executive Summary

As we have continued to report, the results of our latest survey of residential are hard to do justice to comparisons. We suggest you see the results reported later in this issue in “Highlights – Monthly Results” for the previous year comparisons. That said, new orders were down 25% from January last year when they were down 12% after a 27% increase in January 2021. New orders compared to last year were down for some 77% of the participants. This decline was pretty much in line with the conversations we have had lately with industry people. There has been some flattening and even slight increases reported late this quarter so we will see when those results are in.

Shipments were down 4% from December and 3% from last year as shipment comparisons continue to be difficult due to so many issues related to the consistency of imports, as well as continued issues with shortages of workers for domestic producers. The shipment results were about even for gains and losses compared to last year. Backlogs continued to fall, down 40% from last year January. While still high compared to 2019 levels, some of that increase is reflective of significant price increases that were put in over the last couple of years, that have yet to be shipped.

Receivable levels seem in line for the most part, though we think these will need to be watched closely as business at retail has slowed. This can cause some cashflow issues for those folks to be able to keep as current as they were able to do when business was really good.

Inventory levels continue to decline, down 5% from December and up only 20% from last year, down from 40 to 50% increases shown in some prior months.

National

Consumer Confidence

The Conference Board Consumer Confidence Index increased slightly in March to 104.2 from 103.4. The Present Situation Index decreased slightly but was offset by an increase in Expectations Index, up to 73.0, which is still under the magic number of 80.0 as it has been in 12 of the last 13 months. A score of below 80 is the measure for which recession is expected in the next year.

“While consumers feel a bit more confident about what’s ahead, they are slightly less optimistic about the current landscape. The share of consumers saying jobs are ‘plentiful’ fell, while the share of those saying jobs are not so ‘plentiful’ rose. The latest results also reveal that their expectations of inflation over the next 12 months remain elevated—at 6.3%. Overall purchasing plans for appliances continued to soften while automobile purchases saw a slight increase.”

Housing

Existing-home sales reversed a 12-month slide in February, registering the largest monthly percentage increase since July 2020. Month-over-month sales rose in all four major U.S. regions. All regions continued to post year-over-year declines.

Total existing-home sales increased 14.5% from January to February. Year-over-year, sales fell 22.6%.

Single-family home sales were up 15.3% but down 21.4% from the previous year. The median existing single-family home price was $367,500 in February, down 0.7% from February 2022.

Sales of new single‐family houses in February 2023 were 1.1% above the revised January rate but were 19.0% below February 2022 and were down in all regions. Privately‐owned housing completions in February were 12.2% above the revised January estimate and 12.8% above the February 2022 rate. Single‐family housing completions in February were 1.0% above the revised January rate.

Other

Advance estimates of U.S. retail and food services sales for February 2023, were down 0.4% from the previous month, but up 5.4% above February 2022. Total sales for the December 2022 through February 2023 period were up 6.4% from the same period a year ago.

Retail trade sales were down 0.1% from January 2023, but up 4.0% above last year. Food services and drinking places were up 15.3% from February 2022, while general merchandise stores were up 10.5% from last year.
Sales at furniture and home furnishings stores were just slightly ahead in February 2023 versus February 2022 and were up 3.5% over last year, year to date.

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4% in February on a seasonally adjusted basis, after increasing 0.5% in January. Over the last 12 months, the all-items index increased 6.0%.

The index for shelter was the largest contributor to the monthly all-items increase, accounting for over 70% of the increase, with the indexes for food, recreation, and household furnishings and operations also contributing.

The Conference Board Leading Economic Index® (LEI) for the U.S. fell again by 0.3% in February 2023 after also declining by 0.3% in January. The LEI is down 3.6% over the six-month period between August 2022 and February 2023.

Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board said “Negative or flat contributions from eight of the index’s ten components more than offset improving stock prices and a better-than-expected reading for residential building permits. While the rate of month-over-month declines in the LEI has moderated in recent months, the leading economic index still points to risk of recession in the US economy. The most recent financial turmoil in the US banking sector is not reflected in the LEI data but could have a negative impact on the outlook if it persists. Overall, The Conference Board forecasts rising interest rates paired with declining consumer spending will most likely push the US economy into recession in the near term.”

Thoughts

We have had several conversations with executives over the last month trying to stay somewhat current with what is going on daily with business. Obviously, the actual results and resulting opinions changes from day to day. As we have noted before, the old days of worrying about orders on a monthly or even weekly basis have changed to results almost on an hourly basis. But the overall answer we are getting is that business is “slow” no matter the comparisons. With backlogs coming down and deliveries getting back to more normal times, we think this may help business at retail when customers will not have to consider how long the wait may be before getting product delivered.

We will not go into trying to make complete sense of the business comparisons as we have put comparisons in both parts of this report. This is really for individual companies to determine how they stack up with their own business. Needless to say, it does make it difficult for companies and their stockholders and bankers, and others to make sense of the comparisons.

Looking outside the industry, there are so many things being reported, it makes it hard to determine how things really are. Recession now, or not, or one coming or how harsh, is all up for grabs. So much negative news makes it hard to feel really great about where we are heading. Heck, we don’t even have any number-one seeds left in the NCAA tournament (ok, maybe that isn’t all bad for some like FAU fans).

We understand that Premarket was slightly above expectations for most and accomplished what most expect, like tweaking products, or as some told us, at least it makes us much more ready for market when it really happens. We hope Springtime will be here in High Point when you come and we can return to a market that might be a little closer to normal than the last few.

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