Executive Summary

Once again, the results of our survey require taking more history into account. New orders in September were up 13% over September 2022. But September 2022 orders were down 26%. As with the previous surveys, comparisons to 2021 and 2020 are even more difficult. Year to date, new orders for the first nine months were up about 1%.

Shipments were down 20% in September 2023 from 2022 and down 18% for the year to date. The September 2022 shipments were up 5% over 2021 and up 6% year to date. The shipment comparisons are difficult to deal with percent changes as 2020 shipments were up significantly, setting the bar very high. Overall though, shipments in dollars are ahead for the year over order dollars. All of this means that shipments have continued to pull from the backlogs. Plus, the increase in shipments in 2022 was also so large due to the extremely high backlogs, the comparisons of 23 to 22 are not what we would normally expect. Hopefully, all of that is confusing enough.

Backlogs actually increased a bit over August but were down 43% from September 2022. It appears that backlogs are getting to something closer to pre-pandemic levels if one can determine how much price increases are included in the numbers.

The other stats are at least somewhat in line with expectations as you can see from the full report. 

National

Consumer Confidence

The Conference Board Consumer Confidence Index® increased in November to 102.0, up from a downwardly revised 99.1 in October. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—ticked down slightly to 138.2, from 138.6. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—rose to 77.8 in November, up from its downwardly revised reading of 72.7 in October.

The report indicated that “Despite this month’s improvement, the Expectations Index remained below 80 for a third consecutive month—a level that historically signals a recession within the next year. While consumer fears of an impending recession abated slightly, around two-thirds of consumers surveyed in November still perceive a recession to be “somewhat” or “very likely” to occur over the next 12 months. This is consistent with the short and shallow recession we anticipate in the first half of 2024.”

Housing

The housing results were somewhat mixed as total existing homes and single-family homes were down 14.6% from October 2022. Single-family sales in October 2022 were down 28.2% from October 2021. While new residential single-family sales were up 17.7% from a year ago, the volume of sales of both existing and new sales was off significantly. The overall decline was blamed primarily on lower inventories of homes for sale as well as the highest mortgage rates in a generation.

Other

Advance estimates of U.S. retail and food services sales for October 2023, were $705.0 billion, down 0.1% from the previous month, and up 2.5% above October 2022. Total sales for the August 2023 through October 2023 period were up 3.1% from the same period a year ago.

Retail trade sales were down 0.2% from September 2023, and up 1.6% above last year. Gasoline stations were down 7.5% from last year (primarily due to drops in gas prices), while nonstore retailers were up 7.6% from October 2022.

Sales at furniture and home furnishings stores were down 11.8% for the month, bringing year-to-date sales to a reduction of 5.2%.
The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in October on a seasonally adjusted basis, after increasing 0.4% in September. Over the last 12 months, the all-items index increased 3.2% before seasonal adjustment.
The index for shelter continued to rise in October, offsetting a decline in the gasoline index. The energy index fell 2.5% over the month as a 5.0% decline in the gasoline index more than offset increases in other energy component indexes. The food index increased 0.3% in October, after rising 0.2% in September.

The all items less food and energy index rose 4.0% over the last 12 months, its smallest 12-month change since the period ending in September 2021. The energy index decreased 4.5% for the 12 months.

Real gross domestic product (GDP) increased at an annual rate of 5.2% in the third quarter of 2023, according to the “second” estimate released by the Bureau of Economic Analysis.

The increase in real GDP reflected increases in consumer spending, private inventory investment, exports, state and local government spending, federal government spending, residential fixed investment, and nonresidential fixed investment. Imports increased.

Thoughts

In spite of the difficulty of making sense of the results of our surveys, we think the current business levels in residential furniture are back from the unprecedented heights we saw post the start of the COVID pandemic. Everyone is not in the same place, as some still have some backlogs to work down for a part of 2024 shipments, but most seem back to more normal delivery times.

Incoming business seems slower, and some would call it spotty, giving you the feeling from time to time that business is starting to level out to more normal levels, and then it slows down again. All the national economic news, for the most part, continues to say that we are still going to have at least a mild recession, if there is such a thing. Some of you have said your company is already in one.
We need to get the economy a bit more stable and get interest rates back down some. We just heard a report that said that used car prices are up 30% from pre-pandemic levels and that the average car payment today is over $700 a month. That will surely not leave many dollars for furniture purchases. High mortgage rates are also hurting home buyers along with the shortage of inventory. The Conference Board projects that real GDP will respond by just 0.8% in 2024. With all of this, we would suggest that it may be a while before we see the furniture business back to more “normal “levels.

New Orders

According to our latest survey of residential furniture manufacturers and distributors, new orders were up 13% in September 2023 compared to orders in September 2022. Once again, while appearing to be a positive, we need to remember that in September 2022, new orders were down 26% compared to September 2021. The September 2021 and 2020 comparisons were also difficult since 2020 was such an abnormally high growth period. For the September 2023 increase, some 72% of the participants reported increased orders.

Year to date, new orders were up 1% over 2022, when they were down 29% compared to 2021. New orders year to date were actually down for some 63% of the participants in 2023.

Shipments and Backlogs

Shipments in September 2023 were down 20% compared to September 2022 when they were up 5% over the preceding September. Year to date, shipments were down 18% compared to 9 months of 2022 with some 78% of the participants reporting lower shipments than 2022. In 2022, year-to-date shipments were up 26%. Shipments have clearly not followed orders since the pandemic as backlogs were built to unprecedented levels for most and many of the 2022 and 2023 shipments have been made from large carryover backlogs.

Receivables and Inventories

Receivable levels were down 26% compared to September 2022, so somewhat in line with year-to-date shipments and monthly shipments. We would expect these levels to get back in line in the next few months. Inventory levels continued to fall, dropping 2% from August and 26% below last year levels.

Factory and Warehouse Employees and Payroll

Factory and warehouse employees were about even with August and down 7% year to date. The payrolls for these employees were down 7% from last year and down 8% year to date. The payrolls seem in line with the number of employees

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