Executive Summary

Once again, the results of our recent survey of residential furniture manufacturers and distributors require explanation more than just a comparison. New orders in June 2023 were up 23% over June 2022, which at first glance, sounds like things were picking up. But looking back to June 2022, that survey indicated that new orders were actually down some 39% from June 2021. We will give more comparison in the full report, but suffice it to say, the June results were not as rosy as the results might appear. Year to date, new orders were down 8% compared to the same period in 2022. Some 71% of the participants were down year to date.

Shipments in June 2023 were down 28% from June 2022 when they were up 10% over June 2021. Again, the comparisons need more explanation. See the Highlights – Monthly Results section for a more in-depth discussion. For the month, shipments were down for 74% of the participants. Year to date, shipments were down 17% with just over 70% of the participants reporting lower shipments.

Backlogs were up slightly as orders in June were slightly higher than shipments in dollars but were down 58% from June 2022, compared to a decrease of 61% reported last month.

Receivable levels were down significantly, slightly lower than the decrease in shipments. Inventory levels dropped again in June and were down 26% compared to last year. The number of factory and warehouse employees fell again as well as payrolls.

National

Consumer Confidence

The Conference Board Consumer Confidence Index® declined in August to 106.1, from a downwardly revised 114.0 in July. The Present Situation Index fell to 144.8 from 153.0. The Expectations Index declined to 80.2 in August, from 88.0 in July. Expectations were slightly above 80—the level that historically signals a recession within the next year. “Write-in responses showed that consumers were once again preoccupied with rising prices in general and for groceries and gasoline in particular. The pullback in consumer confidence was evident across all age groups.”

“The proportion of consumers saying recession is ‘somewhat’ or ‘very likely’ ticked down again in August but remain elevated at 69.0%. These soundings likely reflect ongoing uncertainty given mixed buying plans. On a six-month moving average basis, plans to purchase autos and appliances continued to trend upward but plans to buy homes—more in line with rising interest rates—continued to trend downward.”

The Conference Board Leading Economic Index® (LEI) for the U.S. declined by 0.4% in July 2023, following a decline of 0.7% in June. The LEI is down 4.0% over the six-month period between January and July 2023. The report indicated that the outlook “remains highly uncertain. The leading index continues to suggest that economic activity is likely to decelerate and descend into mild contraction in the months ahead. The Conference Board now forecasts a short and shallow recession in the Q4 2023 to Q1 2024 timespan.”

Housing

Existing-home sales fell 2.2% in July 2023 compared to June 2023 and were down 16.6% in year-over-year sales. Among the four major U.S. regions, sales grew in the West but faded in the Northeast, Midwest, and South. All four regions were down in year-over-year sales.

Single-family home sales in July fell 1.9% from June and 16.3% from the previous year. The median existing single-family home price for all housing types in July was $406,700, an increase of 1.9% from July 2022.

“Two factors are driving current sales activity – inventory availability and mortgage rates,” said NAR Chief Economist Lawrence Yun. “Unfortunately, both have been unfavorable to buyers.” Unsold inventory was at a 3.3-month supply at the current sales pace, up from 3.1 months in June and 3.2 months in July 2022.

Sales of new single‐family houses in July 2023 were 4.4% above the revised June rate of 684,000 and were 31.5% above the July 2022 estimate.

The median sales price of new houses sold in July 2023 was $436,700. The average sales price was $513,000. The seasonally adjusted estimate of new houses for sale at the end of July was 437,000. This represents a supply of 7.3 months at the current sales rate.

Sales were up substantially in all four regions of the country compared to last year.

Privately owned single-family housing starts in July were 6.7% above the revised June estimate. Starts were up in three regions but offset by a decline in the Northeast.

Other

Advance estimates of U.S. retail and food services sales for July 2023, were up 0.7% from the previous month, and up 3.2% above July 2022. Total sales for the May 2023 through July 2023 period were up 2.3% from the same period a year ago. Retail trade sales were up 0.6% from June 2023, and up 2.0% above last year.

Sales at furniture and home furnishing stores in July 2023 were down 6.3% from July 2022. Sales at these stores were down 3.8% year to date. But remember that sales at these stores were up 15.6% in July 2021 over July 2020 and about even in 2022 with 2021.
The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.2% in July on a seasonally adjusted basis, the same increase as in June. The index for shelter was by far the largest contributor to the monthly all-items increase, accounting for over 90% of the increase. The food index increased 0.2% in July after increasing 0.1% the previous month.

The all-items index increased 3.2% for the 12 months ending July, slightly more than the 3.0% increase for the 12 months ending in June. The all items less food and energy index rose 4.7% over the last 12 months. The energy index decreased 12.5% for the 12 months ending July, and the food index increased 4.9% over the last year.

Thoughts

We were trying to determine what should be said about the current survey and tie in what we are currently hearing about business in general, then try to put that together with what the near-term future might look like. We hear things like, retail seems to be doing ok and have good (maybe not high) expectations for the rest of the year. We also think that 2024 could be our next base year since we tried using 2019, but that has not worked very well on an overall basis due to fluctuations in pricing.

But when we look out to see ahead, we say, well that depends on, can we keep inflation under control and maybe even get a little back, especially with fuel prices and some food prices. Then we say, what will happen in the political world with the Presidential races and what about the economic problems in China? Will the expected recession have a soft landing or have we already had it? What is happening in the banking world, especially for the furniture world? The list goes on and on.

As we continue to say, the industry is not one industry but a whole bunch of individual companies under one large umbrella. Each has its own niche and its own financing needs, its own style of management and sell to different parts of the industry through different channels at different price points.

But the folks in the industry, as a whole, figure a way to work through the murky waters. Not all, as evidenced by some of the closings lately, but when it is all said and done, we are not sure that the failures were all indicative of a bad industry. We do believe that we will get back to the typical industry ways of the more normal ups and a few downs. There probably will be more failures as there always have been, but people still need furniture. As we always say, you don’t have to sell all the furniture in the world. You just have to sell your share at margins you need. You just have to figure out what your share has to be.

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