Executive Summary

As we expected, the results of our survey for May continued to indicate slow business for the most part. While orders in May were up 15% over May 2022, a good portion of that increase appeared to be caused by certain larger retailers making large commitments for certain parts for the rest of the year. But 64% of the participants did post increases in orders so that was a good sign. Still, year-to-date, new orders were down 13% with 78% of the participants reporting a decline in year-to-date orders.

Shipments were down 18% from May 2022 and down 15% year-to-date. The year-to-date numbers were a bit more mixed as 63% reported a decrease in year-to-date shipments. Backlogs fell slightly from April and were down 61% from last year. Backlogs seem to be back to more normal levels now considering the built-in price increases and new order rates.

National

Consumer Confidence

The Conference Board Consumer Confidence Index® rose again in July to 117.0, up from 110.1 in June. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—improved to 160.0 from 155.3 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—improved to 88.3 from 80.0 in June. Importantly, Expectations climbed well above 80—the level that historically signals a recession within the next year. Despite rising interest rates, consumers are more upbeat, likely reflecting lower inflation and a tight labor market. It was interesting to us that the report said that “although consumers are less convinced of a recession ahead, we (The Conference Board) still anticipate one likely before yearend.”

The report noted, “greater confidence was evident across all age groups, and among both consumers earning incomes less than $50,000 and those making more than $100,000.”

On the other hand, the Leading Economic Index® (LEI) for the U.S. declined by 0.7% in June 2023 following a decline of 0.6% in May. The LEI is down 4.2% over the six-month period between December 2022 and June 2023—a steeper rate of decline than its 3.8% contraction over the previous six months (June to December 2022).

The report indicated that the Leading Index has been in decline for fifteen months—the longest streak of consecutive decreases since 2007-08, during the runup to the Great Recession. Taken together, June’s data suggests economic activity will continue to decelerate in the months ahead. They forecast that the US economy is likely to be in recession from Q3 2023 to Q1 2024.

Housing

Existing-home sales slipped in June, with sales mixed in the four major U.S. regions, with the Northeast experiencing gains, the Midwest holding steady, and the South and West posting decreases. All four regions recorded year-over-year sales declines.
Single-family home sales declined 3.4% from 3.85 million in May and 18.8% from the previous year. The median existing single-family home price was $416,000 in June, down 1.2% from June 2022.

Sales of new single‐family houses in June 2023 were at a seasonally adjusted annual rate of 697,000. This was 2.5% below the revised May rate of 715,000, but was 23.8% above the June 2022 estimate of 563,000.

The median sales price of new houses sold in June 2023 was $415,400. The average sales price was $494,700. The seasonally adjusted estimate of new houses for sale at the end of June was 432,000. This represents a supply of 7.4 months at the current sales rate.

Gross Domestic Product

Real GDP increased at an annual rate of 2.4% in the second quarter of 2023, according to the “advance” estimate. In the first quarter, real GDP increased 2.0%.

The increase in real GDP reflected increases in, among other things, consumer spending. The increase in consumer spending reflected increases in both services and goods. Imports, which are a subtraction in the calculation of GDP, decreased.

Other

Advance estimates of retail and food services sales for June 2023, were up 0.2% from the previous month, and up 1.5% above June 2022. Total sales for the April 2023 through June 2023 period were up 1.6% from the same period a year ago.
Retail trade sales were up 0.2% from May 2023, and up 0.5% above last year. Non-store retailers were up 9.4% from last year, while food services and drinking places were up 8.4% from June 2022.

Sales at furniture and home furnishings stores in June were up 1.4% over May but down 4.6% compared to June 2022. Sales at these stores were down 3.2% year to date.

The Consumer Price Index for All Urban Consumers rose 0.2% in June, after increasing 0.1% in May. Over the last 12 months, the all-items index increased 3.0% before seasonal adjustment.

The index for shelter was the largest contributor to the monthly all-items increase, accounting for over 70% of the increase, with the index for motor vehicle insurance also contributing. The food index increased 0.1% in June. The index for food at home was unchanged over the month while the index for food away from home rose 0.4% in June. The energy index rose 0.6% in June as the major energy component indexes were mixed.

Thoughts

To us, it seems difficult for the overall economy to really know what the expectations should be. Consumer confidence is up, though that report still mentions recession in spite of the employment numbers being really good. The second quarter GDP report was positive and back in a more normal range, yet the Leading Economic Indicators report predicts we are in a recession beginning the third quarter through first quarter 2024. The consumer price index keeps retreating in spite of gas prices rising, though we wonder what the real situation is when the price of a $10 item goes up 8% creating 8% inflation. Then if inflation tames to 3%, doesn’t that really mean the $10 item went to $10.80, and then at 3% the item would be $11.12.

Anyway, we are not economists, so we leave it up to you to know what all this means to your business. As we have hammered the point so many times, this is not one industry but a whole bunch of different industries rolled into one. Each of you, in effect, has your own. It is great where the total industry is rising, but when the tables turn as they seem to have done recently, you have to look at your own results in comparison to what our numbers say, then take a realistic look at why you are better or worse, and why.
Let’s hope that if it is a recession, it is one that we hardly notice as we hope to return to more normal times soon.

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