Executive Summary

The contraction of business continued in April, despite having the April market. We realize that it generally takes a while for market orders to come through. Hopefully, we may see some pick-up in the May results. New orders fell 19% in the April-to-April comparison and dropped 16% from March 2023. Orders fell for 84% of the participants. Year to date, orders were also down 19% with over 80% of the participants reporting a decline in new orders.

Shipments also continued to fall as shipments were down 28% for the month compared to April 2022 and were down 14% year to date. For the month, shipments dropped for 88% of the participants while the year-to-date decline was for only 60% of the participants. With shipment dollars exceeding new order dollars, backlogs fell 8% from March and were down 64% from last April, when they were still at extremely high levels.

Receivable levels seem in line with the monthly shipments, declining 31% and inventories were 12% below last year after a 5% decline in March. It will take some time to determine what inventory levels need to be, due to the decline in business plus how much “protection” is needed in the future due to supply shortages.

The number of factory and warehouse employees fell again. We continue to believe attrition is taking care of some of the decline as well as underperformers, but business needs to pick up soon to avoid more serious cuts.

National

Consumer Confidence

The Conference Board Consumer Confidence Index® increased in June to 109.7, up from 102.5 in May. The Present Situation Index rose to 155.3 from 148.9 last month. The Expectations Index rose to 79.3 from 71.5 in May. Expectations have remained below 80—the level associated with a recession within the next year—every month since February 2022, with the exception of a brief uptick in December 2022.

“Consumer confidence improved in June to its highest level since January 2022, reflecting improved current conditions and a pop in expectations,” said Dana Peterson, Chief Economist at The Conference Board. Nonetheless, the expectations gauge continued to signal consumers anticipating a recession at some point over the next 6 to 12 months.”

“Meanwhile, on a six-month moving average basis, plans to purchase autos and homes have slowed, after picking up earlier in 2023. Meanwhile, vacation plans within the next six months continued to flag, led largely by declines in plans to travel domestically. This is an important indicator of desires to spend on services ahead, which may be a signal that post-pandemic ‘revenge spending’ on travel may have peaked and is likely to slow over the rest of this year.”

Housing

Existing home sales were mixed among the four major U.S. regions, with the South and West showing improvements and the Northeast and Midwest declining. All four regions experienced year-over-year sales declines.

Total existing-home sales in May rose 0.2% from April. Year-over-year, sales dropped 20.4%. Single-family home sales were down 0.3% in April and 20.0% from the previous year. The median existing single-family home price was down 3.4% from May 2022.
Total housing inventory was up 3.8% from April but down 6.1% from one year ago. The median existing-home price for all housing types in May was $396,100, a decline of 3.1% from May 2022.

Other

Advance estimates of U.S. retail and food services sales for May 2023 on an adjusted basis were up 0.3 percent from April, and up 1.6 percent above May 2022. Total sales for the March 2023 through May 2023 period were up 1.7 percent from the same period a year ago. Retail trade sales were up 0.3 percent from April 2023, and up 0.7 percent above last year. Nonstore retailers were up 6.5 percent from last year, while food services and drinking places were up 8.0 percent from May 2022. The largest gain year to date was at food services and drinking places, up 12.9 percent.

On an adjusted basis, sales at furniture and home furnishings stores in May were down 6.4 percent from May 2022 but were up slightly from April. Year to date, sales at these stores were down 2.9 percent from the same period a year ago.

The Conference Board Leading Economic Index® (LEI) for the U.S. declined by 0.7 percent in May 2023, following a decline of 0.6 percent in April. The LEI is down 4.3 percent over the six-month period between November 2022 and May 2023. Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board said the decline continues to point to weaker economic activity ahead. Rising interest rates paired with persistent inflation will continue to further dampen economic activity.

The all-items index of the consumer price index increased 4.0 percent for the 12 months ending May, the smallest 12-month increase since March 2021. The all-items less food and energy index rose 5.3 percent over the last 12 months. The energy index decreased 11.7 percent for the 12 months ending May, and the food index increased 6.7 percent over the last year.

Total nonfarm payroll employment increased by 339,000 in May, but the unemployment rate rose by 0.3 percentage points to 3.7 percent.

Thoughts

There is some good news out there. In some recent talks with industry leaders, we are hearing that there may have been some uptick recently in at least some areas. We continue to hear that, at the retail level, some still have too much inventory, and customers coming in is not as brisk as some might like it, but overall, there seems to be some positive feeling. Things have been so difficult to compare, and we know that summertime usually has some slowdowns, but comments like “business can be described as good, not great,” make us believe that many have been surprised that business has not fallen off like some expected it to do.

The increase in consumer confidence should be helpful. While the report noted that domestic travel may be slowing, you would never tell it by the crowds at the beaches a couple of weeks ago on our family trip. While prices at restaurants have certainly increased rather substantially, we are starting to hear that prices are leveling out. Even comments we heard about not many material price increases at the manufacturing level were good to hear. And lead times seem to have come down for most, which should help consumer decisions about buying.

Oh, and in the consumer price index report, did you see that the price of eggs were down almost 14%. For some reason, that really struck me as important. Of course, we have not seen that in the breakfast prices yet, but still it seemed important.

Have a great 4th of July. Celebrate our U.S. Independence Day.

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