Executive Summary

New orders in March 2023 fell 14% from March 2022 levels according to our latest survey of furniture manufacturers and distributors, continuing the monthly declines from the previous year. New orders were down for 71% of the participants. Year-to-date, new orders were down 18% compared to the first quarter of 2022. Year-to-date orders were down for 78% of the participants.

Shipments were down 16% from last March and down 19% year to date. For the month, shipments were down 61% and down year-to-date for 56% of the participants. Several participants are continuing to ship from healthy backlogs while others have brought backlogs down to more normal levels and are shipping from current order rates, reversing the trends we had seen when orders were down, but shipments were up.

Once again, backlogs fell from 2022 levels, down 63% from March 2022 and down 6% from February. Some of the participants continue to have larger backlogs so overall backlog total dollars remain higher than pre-pandemic, but we would expect that much of that increase is likely due to price increases.

Receivable levels remain in line with the decrease in year-to-date sales, but we continue to hear that there is some slowdown in the quick payments that were received when there was a shortage of goods deliverable. Inventory levels declined again and were down 5% from March 2022.

Employment results seem in line and while the number of employees was down from last year, we think that is likely attrition from marginal employees hired when finding employees was so difficult and some were hired despite their experience or skills.

National

Consumer Confidence

The Consumer Confidence Index declined in May as both the Present Situation Index and the Expectations Index fell. The Expectations Index was below 80 again, the level that is associated with a recession within the year. The report noted that May’s decline reflected a particularly worsening in the outlook among consumers over 55 years of age. Plans to purchase homes in the next six months held steady but the report noted that plans to purchase autos and big-ticket appliances ticked up compared to April. Hopefully, that includes furniture.

Housing

Total existing-home sales slid 3.4% from March to a seasonally adjusted annual rate of 4.28 million in April. Year-over-year, sales fell 23.2% from April 2022. All four regions of the country were down significant double digits from last year’s April results.
Single-family home sales fell 3.5% in March and 22.4% from the previous year. The median existing single-family home price was $393,300 in April, down 2.1% from April 2022.

Existing condominium and co-op sales were down 2.3% from March and 29.5% from one year ago. The median existing condo price was $348,000 in April, an annual increase of 0.7%.

“Home sales are bouncing back and forth but remain above recent cyclical lows,” said NAR Chief Economist Lawrence Yun. “The combination of job gains, limited inventory, and fluctuating mortgage rates over the last several months have created an environment of push-pull housing demand.”

Sales of new single‐family houses in April 2023 were 4.1% above the revised March rate and 11.8% above the April 2022 estimate.

Compared to April 2022, sales in April were up 20.6% in the Midwest and 23.4% in the South, while declining 46.7% in the Northeast and 2.8% in the West.

Privately owned housing starts in April were 2.2% above the revised March estimate but were 22.3% below the April 2022 rate. Single‐family housing starts in April were 1.6% above the revised March figure but down 28.1% from last April.

Single-family starts regionally compared to April 2022 were down 42.6% in the Midwest, 27.6% in the South, and 29.2% in the West, offset by a 15.1% increase in the Northeast.

Other

Advance estimates of U.S. retail and food services sales for April 2023, were up 0.4% from the previous month, and up 1.6% above April 2022. Total sales for the February 2023 through April 2023 period were up 3.1% from the same period a year ago.
Retail trade sales were up 0.4% from March 2023, and up 0.5% above last year. On an adjusted basis, sales at furniture and home furnishings stores were down 6.4% from last year and down 1.6% year-to-date.

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4% in April on a seasonally adjusted basis, after increasing 0.1% in March. The index for shelter was the largest contributor to the monthly all-items increase, followed by increases in the index for used cars and trucks and the index for gasoline. The food index was unchanged in April, as it was in March.

The all-items index increased 4.9% for the 12 months ending April; this was the smallest 12-month increase since the period ending April 2021.

Real gross domestic product (GDP) increased at an annual rate of 1.3% in the first quarter of 2023, according to the “second” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.6%.

Thoughts

Current words to describe business are “slow” or “soft” or various other adjectives, none of which are very exciting. Many in the economic world, including quotes in this newsletter, say we are either in a recession or heading for one. Many in the industry will say we are right now. Large backlogs have kept many recording nice sales levels, but as new orders continue to be less than shipments, sales levels will soon decline as many have already seen.

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.

As we write this edition, we are waiting for Congress to pass the bills that will keep the country from defaulting on its debt. We hope political games can make the right decisions for all and not just a few. It is a shame we have to get down to the last minute to get these things ironed out, but that seems to be the way things are these days. We hope those that control such things will not just “kick the can down the road”.

We hope Memorial Day sales can stimulate some business at retail, but we all know that summertime generally is not the strongest period for furniture business for all the obvious reasons. As employment levels remain strong, we hope the recession, if it is coming or has already, is one that is short-lived and not very deep or “mild” as some have described.

As we note in the details of this month’s survey, comparisons to prior periods continue to be difficult. The mix of strong demand then lessening, along with fluctuating prices adds to the confusion.

We hope that Memorial Day was a good holiday to help us to remember those who have and are serving our country.

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