Executive Summary

The results of our latest survey of residential furniture manufacturers and distributors may be one of the last comparisons that may make sense for a while as this survey compares February 2022 to February 2021, and allows a comparison to February 2020, the last month before the effects of the pandemic setting in. Even those comparisons are not necessarily straight up. New orders fell 20% from February 2021 but 2021 orders were up 34% over February 2020. February results brought the year-to-date decline in orders to 16% compared to the 2021 31% increase over 2020. Some 75% of the participants reported a decline in orders for the month, with 63% reporting declines year to date.

Shipments were flat compared to February 2021 when they were up 18% over February 2020, bringing year-to-date shipments to a 1% decline. Backlogs were up 35% over February 2021 down from 43% reported in January. But all these results, especially for orders and shipments, are somewhat affected by the beginning of price increases that really began to take effect in the latter part of 2021.

Receivable levels remained in good shape considering shipment levels. Inventories increased 32% over last year when they were up 15% over February 2020. So, looking at the somewhat slowdown in orders, there is some concern over inventory levels. With backlogs so high, the increase may not be all that concerning for now but will need watching.

Employment levels continue to show some progress but according to most we talk with, finding people is at least one of the top two priorities whether manufacturing or distribution. Payrolls continue to climb as wages are increased along with the number of employees.

National

Consumer Confidence

The Conference Board Consumer Confidence Index® decreased slightly in April, after an increase in March. Lynn Franco, Senior Director of Economic Indicators at The Conference Board said “The Present Situation Index declined, but remains quite high, suggesting the economy continued to expand in early Q2. Expectations, while still weak, did not deteriorate further amid high prices, especially at the gas pump, and the war in Ukraine. Vacation intentions cooled but intentions to buy big-ticket items like automobiles and many appliances rose somewhat.”

Housing

Existing-home sales decreased in March, marking two consecutive months of declines. Month-over-month, sales in March waned in three of the four major U.S. regions while holding steady in the West. Sales were down across each region year-over-year.

The median existing single-family home price was $382,000 in March, up 15.2% from March 2021. Total housing inventory at the end of March totaled 950,000 units, up 11.8% from February and down 9.5% from one year ago.

Sales of new single‐family houses in March 2022 were 8.6% below the revised February rate of 835,000 and were 12.6% below March 2021. Compared to March 2021, single-family sales were up 12.8% in the Northeast and 21.0% in the West while down 13.8% in the Midwest and 24.7% in the South.

The median sales price of new houses sold in March 2022 was $436,700. The seasonally adjusted estimate of new houses for sale represented a supply of 6.4 months at the current sales rate.

Single‐family housing starts in March were 1.7% below the revised February rate and were 4.4% below March 2021. Single-family starts were down from March a year ago by 32.6% in the Northeast, 22.6% in the Midwest, and 0.6% in the South, while up 10.9% in the West.

Other

Advance estimates of U.S. retail and food services sales for March 2022 were up 0.5% from the previous month, and 6.9% above March 2021. Total sales for the January 2022 through March 2022 period were up 12.9% from the same period a year ago.

Retail trade sales were up 0.4% from February 2022, and up 5.5% above last year. Gasoline stations were up 37.0% from March 2021, while food services and drinking places were up 19.4% from last year. Sales at furniture and home furnishings stores, in March 2022 compared to March 2021, were up 3.6% and up 5.5% year to date.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 1.2% in March on a seasonally adjusted basis after rising 0.8% in February. Over the last 12 months, the all-items index increased 8.5% before seasonal adjustment.

Increases in the indexes for gasoline, shelter, and food were the largest contributors to the seasonally adjusted all items increase. The gasoline index rose 18.3% in March and accounted for over half of the all-items monthly increase; other energy component indexes also increased. The food index rose 1.0% and the food at home index rose 1.5%.

The all-items index rose 8.5% for the 12 months ending March, the largest 12-month increase since the period ending December 1981. The all items less food and energy index rose 6.5%, the largest 12-month change since the period ending August 1982. The energy index rose 32.0% over the last year, and the food index increased 8.8%, the largest 12-month increase since 1981.

Real gross domestic product (GDP) decreased at an annual rate of 1.4% in the first quarter of 2022, according to the “advance” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 6.9%.

The decrease in real GDP reflected decreases in private inventory investment, exports, federal government spending, and state and local government spending, while imports, which are a subtraction in the calculation of GDP, increased. Personal consumption expenditures (PCE), nonresidential fixed investment, and residential fixed investment increased.

Total nonfarm payroll employment rose by 431,000 in March, and the unemployment rate declined to 3.6%. Notable job gains continued in leisure and hospitality, professional and business services, retail trade, and manufacturing. The number of unemployed persons decreased by 318,000 to 6.0 million.

The Conference Board Leading Economic Index® (LEI) for the U.S. increased by 0.3% in March following a 0.6% increase in February. The LEI increased by 1.9% in the six-month period from September 2021 to March 2022.

“The US LEI rose again in March despite headwinds from the war in Ukraine,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “This broad-based improvement signals economic growth is likely to continue through 2022 despite volatile stock prices and weakening business and consumer expectations.

Thoughts

The February results, while appearing negative were not all that bad considering how good the comparative prior year numbers were, but we are starting to feel some real slowing of business in general. We are hearing current business, March and April, while slowing down, is still respectable. It appears that the lower end may be hurting more than middle and upper price points as inflation is affecting those customers a bit more.

The drop in GDP estimates for the first quarter makes sense though apparently, it was not that negative at the consumer spending level. We have all expected that the current levels of business would not last forever so the slowdown is not unexpected even though we would all hope it could continue. But the overall economy being affected by inflation, supply chain issues for many products, the war in Ukraine and the uncertainties that brings, plus all the political negativity has had to affect consumer spending on furniture.
We think the comments from some at retail saying their warehouses are full, may be affected by the folks buying whatever they could get their hands on just to have product, but those products may just not be good selling products.

The next few months should be interesting. Hopefully, the price increases in raw materials, as well as imported products, have begun to subside as business returns to more normal levels. This should also help with the freight issues. While we don’t see container costs going back to the good ole days, as demand decreases, we should see some significant reductions from some of the very high prices.

For now, business should continue to be good as shipments catch up and decrease the high backlogs. Hopefully, that will keep goods flowing until some of the uncertainties shake out.