Executive Summary

Our latest survey of residential furniture manufacturers and distributors continued to reflect the slower business levels. New orders in February were down 17% from February 2022, though up slightly from January 2023. Orders were down for over 80% of the participants. Year to date, orders were down 20% for the two months compared to last year. We looked back at February 2020 results, the month before the start of the pandemic, and found that orders were down about 10% from that month. Obviously, there have been several price increases since that time, so the decline in units is likely more, depending on the mix of products.

Shipments were down 6% in February compared to February 2022. Year to date, shipments were down 4%. As shipments exceeded orders in dollars, backlogs fell again, down 6% from January. Backlogs were down 62% from backlogs in February 2022. Shipments were down for 56% of the participants.

Receivable levels seem in line and in talks, seem to be in good shape. There are some concerns over the slow business at retail which may cause cash flow issues for some. Inventory levels fell again in February compared to January and were only 5% ahead of February last year, much more in line with current business. At least some of the increase over last year is in price increases, though that will change as some freight costs have now dropped.

National

Consumer Confidence

The Consumer Confidence Index fell in April to 101.3, down from 104.0 in March. The Present Situation Index increased to 151.1 from 148.9 last month. The Expectations Index fell to 68.1 from 74.0. The Expectations Index remained below 80 almost every month since February 2022, which is the level associated with a recession expected within the next year.

Ataman Ozyildirim, Senior Director, Economics at The Conference Board said “April’s results show consumer inflation expectations over the next 12 months remain essentially unchanged from March at 6.2%. Overall purchasing plans for homes, autos, appliances, and vacations all pulled back in April, a signal that consumers may be economizing amid growing pessimism.”

Housing

Existing-home sales edged lower in March with month-over-month sales declining in three out of four major U.S. regions, while sales in the Northeast remained steady. All regions posted year-over-year decreases. Year-over-year, sales fell 22.0%.

Single-family home sales were down in March, down 2.7% from February and 21.1% from one year ago. The median existing single-family home price was $380,000 in March, down 1.4% from March 2022.

“Home sales are trying to recover and are highly sensitive to changes in mortgage rates,” said NAR Chief Economist Lawrence Yun. “Yet, at the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand. It’s a unique housing market.”

Sales of new single‐family houses in March 2023 were 9.6% above the revised February rate but were 3.4% below the March 2022 estimate. Compared to March 2022, sales were down 11.3% in the Midwest, 3.3% in the South, and 9.0% in the West. Sales in the Northeast were up 27.5%.

Privately owned housing starts in March were 0.8% below the revised February estimate and 17.2% below the March 2022 rate. Single‐family housing starts in March were 2.7% above the revised February estimate.

Single-family starts were down in double digits in all regions of the country except for the Northeast where they were up 10.9% compared to March 2022.

Other

Advance estimates of U.S. retail and food services sales for March 2023, were down 1.0% from the previous month, but up 2.9% above March 2022. Total sales for the January 2023 through March 2023 period were up 5.4% from the same period a year ago. Retail trade sales were down 1.2% from February 2023 but up 1.5% above last year.

Sales in March at furniture and home furnishings stores were down 2.4% from March 2022. Year to date, sales at these stores were up 1.5% for the three months.
The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1% in March on a seasonally adjusted basis, after increasing 0.4% in February. Over the last 12 months, the all-items index increased 5.0% before seasonal adjustment.

The index for shelter was by far the largest contributor to the monthly all-items increase. This more than offset a decline in the energy index. The food index was unchanged in March with the food at home index falling 0.3%.

The all-items less food and energy index rose 5.6% over the last 12 months. The energy index decreased 6.4% for the 12 months ending March, and the food index increased 8.5% over the last year.

Real gross domestic product (GDP) increased at an annual rate of 1.1% in the first quarter of 2023, In the fourth quarter, real GDP increased 2.6%.

Thoughts

We finished off our visits at the High Point Market with what seemed like a pretty good market, at least from an attendance standpoint. The significant retailers and buyers were here, and more and more designers continue to come. As always, the “mood” of market was good as it is always great to see old friends, make new ones, and see great product shown the way furniture is supposed to be shown.

That said, the talk of business back at home for most was best described as “slow.” For retailers, the comments were that traffic is down but those that do shop, seem to be buying.

The overall economy is definitely slower. The GDP for the quarter reflected that and the economic news seems to say recession is near, though many would say it is already here, especially at the lower end.

The troubled banks are not going to help matters and the continued increase in rates is not helping. The higher mortgage rates, along with higher inflation in general, are definitely affecting most people’s pocketbooks, especially for purchases that can be delayed. The issues also are slowing the housing market, which usually helps to drive furniture purchases.

The one issue we heard at market that was also troubling was the continued push to lower retail prices. We have pushed for prices to stay at higher levels as during the last couple of years. It has been proven that product could be sold at the higher prices. We understand that prices can and should be dropped for the change in container costs, but most other prices for material and labor have not gone down much, if any. It would be a shame for the industry to give back much-needed margins that were seen during the pandemic.

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