Executive Summary

New orders rose 6% in December 2023 compared to December 2022, which marks the 8th straight month orders have grown over the prior year, but a cooling off from the double-digit percentages we’ve been seeing. For calendar 2023, new orders were up 5% over 2022, which were down (33)% from 2021.

Shipments in December 2023 were down (4)% from November 2023 and down (14)% from December 2022, which were up 3% from December 2021. For calendar 2023, shipments were down (17)% from 2022. So despite recent improvements in new orders, trends continue to be affected by many companies shipping from their historically high backlogs through much of 2022. Accordingly, December 2023 backlogs were down (5)% from November 2023 and down (33)% compared to December 2022.

Receivable levels were down (12)% from November 2023, reversing the apparent 5% timing difference increase from the prior month. Receivable levels were down (16)% from December 2022, which is materially in line with the year-to-date decline in shipments.

Inventories and employee levels are again in line with prior months, but down from December 2022, indicating that companies have substantially adjusted levels to match current operations.

National

Consumer Confidence

The Conference Board Consumer Confidence Index® fell in February to 106.7, down from a revised 110.9 in January. February’s decline in the Index occurred after three consecutive months of gains.

The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell back to 147.2 in February from 154.9 in January.

The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—slipped to 79.8, down from a revised 81.5 in January. An Expectations Index reading below 80 often signals recession ahead.

On a six-month basis, buying plans for autos, homes, and big-ticket appliances dipped slightly. The share of consumers planning a vacation over the next six months also declined. Expectations that interest rates will rise over the year ahead picked up slightly to 42.7%, which may have influenced buying plans. Meanwhile, consumers remained upbeat about stock prices over the year ahead.

Housing

Existing-home sales grew in January, according to the National Association of REALTORS®. Among the four major U.S. regions, sales accelerated in the Midwest, South, and West, and remained steady in the Northeast. Year-over-year, sales improved in the West, and decreased in the Northeast, Midwest, and South.

Total existing-home sales elevated 3.1% from December to a seasonally adjusted annual rate of 4.00 million in January. Year-over-year, sales slipped 1.7% (down from 4.07 million in January 2023).

Single-family home sales moved higher to a seasonally adjusted annual rate of 3.6 million in January, up 3.4% from 3.48 million in December but down 1.4% from the prior year. The median existing single-family home price was $383,500 in January, up 5.0% from January 2023.

At a seasonally adjusted annual rate of 400,000 units in January, existing condominium and co-op sales were unchanged from last month and down 4.8% from one year ago (420,000 units). The median existing condo price was $339,400 in January, up 5.7% from the previous year ($321,100).

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.77% as of February 15. That’s up from 6.64% the previous week and 6.32% one year ago.

Sales of new single‐family houses in January 2024 were at a seasonally adjusted annual rate of 661,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 1.5% above the revised December rate of 651,000 and is 1.8% above the January 2023 estimate of 649,000.

Compared to January 2023 on a seasonally adjusted basis, sales were up 1.5% overall with sales up 72.0% in the Northeast, 7.7% in the Midwest, 38.7% in the West, and down (15.6)% in the South.

Other

Real gross domestic product (GDP) increased at an annual rate of 3.2% in the fourth quarter of 2023, according to the “second” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 4.9%.

Real GDP increased 2.5% in 2023 (from the 2022 annual level to the 2023 annual level), compared with an increase of 1.9% in 2022. The increase in real GDP in 2023 primarily reflected increases in consumer spending, nonresidential fixed investment, state and local government spending, exports, and federal government spending that were partly offset by decreases in residential fixed investment and private inventory investment. Imports decreased.

Sales at furniture and home furnishings stores were up 1.4% in January 2024 from December 2023 on a seasonally adjusted basis, but down 9.8% from January 2023.

The Consumer Price Index for All Urban Consumers increased 0.3% in January on a seasonally adjusted basis, after rising 0.2% in December, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all-items index increased 3.1% before seasonal adjustment.

Thoughts

Economic indicators, as well as our monthly stats, continue to provide mixed results and accordingly, expectations for 2024.

Overall consumer confidence took a step back in February 2024, which seems at odds with positive economic data such as steady employment, diminishing inflation, and a strong stock market.

Housing is also showing some signs of life despite the current interest rate environment, and though expected to come slowly and methodically, there appears to be help on the way in the form of mid-year interest rate cuts from the Fed that should drive additional housing and furniture sales activity.

Consistent with many economic reports, the Conference Board is no longer forecasting a general recession for 2024, though we know the furniture industry tends to move at its own pace.

People we’ve spoken to recently within the industry are largely cautiously optimistic about 2024 and that recent trends and positive outlooks for the coming year will outweigh the negative factors associated with the election and international concerns that seem to dominate the news cycle.

New Orders

According to our latest survey of residential furniture manufacturers and distributors, new orders rose 6% in December 2023 compared to December 2022 marking the 8^th straight month orders have grown over the prior year, though cooling off from the double-digit percentage growth we saw in the previous seven months. Approximately two-thirds of the participants reported increased orders in December 2023 compared to a year ago. For calendar 2023, new orders were up 5% over 2022, though 2022 year-to-date orders were down (31)% from 2021.

Shipments and Backlogs

Shipments in December 2023 were down (4)% from November 2023 and down (14)% from December 2022, which were up 3% from December 2021. Shipments in December 2023 were down for approximately two-thirds of the participants compared to December 2022. For calendar 2023, shipments were down (17)% from 2022. So despite recent improvements in new orders, trends continue to be affected by many companies shipping from their historically high backlogs through much of 2022. And with month-over-month orders declining, December 2023 backlogs were down (5)% from November 2023 and down (33)% compared to December 2022.

Receivables and Inventories

Receivable levels were down (12)% from November, which seems to be a normalization from the 5% increase spike we saw in the prior month. Receivable levels were down (16)% from December 2022, which is materially in line with the year-to-date decline in shipments.

Inventories were down slightly from November 2023 and were down (28)% from December 2022, again indicating that most companies have rebalanced their inventory levels to match current operations.

Factory and Warehouse Employees and Payroll

The number of factory and warehouse employees was down (7)% from December a year ago and materially flat with November 2023, again indicating most companies have right-sized their teams, though most are still eager to add good people when available.

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