Executive Summary

As we have noted in the last few months, the results of our survey of residential furniture manufacturers and distributors need to be considered with commentary. For the first time since June 2020, new orders in July 2021 were down compared to the same month of 2020. New orders were down 11% compared to July 2020. But the commentary to that is that July 2021 orders were up 24% compared to July 2019. July 2020 was really just the start of the comeback from the worst of business created by the pandemic, as orders were up 39% over July 2019.

Interesting fact though is that over one half of the participants reported increased orders from last year, some up significant double digits. On the other hand, some of the declines in orders were down significant double digits. So, the results in July 2021 really related to how fast companies were coming back from the start of the COVID shutdowns.

Year to date through July, orders were up 39%. Orders were up for some 91% of the participants.

Shipments were up 21% over July 2020 as there was plenty of backlog that could be shipped. The increase in shipments for the month put year to date shipments up 39%. Over 90% of the participants reported the increases in shipments both for the month and year to date. Shipments were down 19% from June 2021, but we believe that was related to vacation weeks for most.

Backlogs inched up slightly and were 108% higher than July 2020, as the lack of materials and labor as well as all the freight issues would not allow companies to ship more and cut into the backlogs.

Receivable levels continue to make sense compared to shipments year to date. The change from June to July appeared to be a timing issue as shipments were down 19% with receivables down 2%.

Inventories were up 51% over last year, but last year inventories were down 10% so some of that is timing and the rest is participants knowing that having inventory now is critical. The issue now is, do you have all of the “right” inventory that you need.

The employee and wage levels for factory and warehouse personnel are in as good a shape as they can be considering the shortage of workers.

National

Consumer Confidence

Lynn Franco, Senior Director of Economic Indicators at The Conference Board said “Consumer confidence dropped in September as the spread of the Delta variant continued to dampen optimism. Concerns about the state of the economy and short-term growth prospects deepened, while spending intentions for homes, autos, and major appliances all retreated again. Short-term inflation concerns eased somewhat but remain elevated. Consumer confidence is still high by historical levels—enough to support further growth in the near-term—but the Index has now fallen 19.6 points from the recent peak of 128.9 reached in June. These back-to-back declines suggest consumers have grown more cautious and are likely to curtail spending going forward.”

Housing

Existing home sales in August fell 2% from July 2021 and were 1.5% below August 2020. But August 2020 sales were up 10.5% over August 2019, so the August 2021 sales were up 8.3% over August 2019. As we have noted with the furniture survey, comparisons to last year will be difficult for some time due to the pandemic fluctuations. All four regions reported a decrease from August 2020, but all four regions showed an increase in sales over August 2019.

“Sales slipped a bit in August as prices rose nationwide,” said Lawrence Yun, NAR’s chief economist. “Although there was a decline in home purchases, potential buyers are out and about searching, but much more measured about their financial limits, and simply waiting for more inventory.”

Total housing inventory at the end of August totaled 1.29 million units, down 1.5% from July’s supply and down 13.4% from one year ago. The median existing-home price for all housing types in August was $356,700, up 14.9% from August 2020, as prices increased in each region. This marks 114 straight months of year-over-year gains.

Sales of new residential homes in August were slightly above July sales but were down 24.3% from August 2020. Sales were just slightly above 2019 in 2021.

Housing starts were up nicely in August, up 3.9% from July 2021 and up 17.4% over August 2020. Single family starts in August were up 5.2% over August 2020, up in the Northeast and South but down in the Midwest and West.

Other

U.S. retail and food services sales for August 2021 were up 0.7% from the previous month, and 15.1% above August 2020. Total sales for the June 2021 through August 2021 period were up 16.3% from the same period a year ago. Retail trade sales were up 0.8% from July 2021, and up 13.1% above last year. Clothing and clothing accessories stores were up 38.8% from August 2020, while gasoline stations were up 35.7% from last year.

Sales at furniture and home furnishings stores in August were up 15.6% over August a year ago. Sales at these stores were up 35.2% year to date over the same period a year ago.

The Consumer Price Index for All Urban Consumers increased 0.3% in August on a seasonally adjusted basis after rising 0.5% in July. Over the last 12 months, the all-items index increased 5.3% before seasonal adjustment. The indexes for gasoline, household furnishings and operations, food, and shelter all rose in August and contributed to the monthly all items seasonally adjusted increase. The energy index increased 2.0%, mainly due to a 2.8% increase in the gasoline index. The index for food rose 0.4%, with the indexes for food at home and food away from home both increasing 0.4%. The index for all items less food and energy rose 0.1% in August, its smallest increase since February 2021.

Total nonfarm payroll employment rose by 235,000 in August, and the unemployment rate declined by 0.2 percentage point to 5.2%.

The Conference Board Leading Economic Index® (LEI) for the U.S. increased by 0.9% in August following a 0.8% increase in July and a 0.6% increase in June. Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board said “While the Delta variant—alongside rising inflation fears—could create headwinds for labor markets and the consumer spending outlook in the near term, the trend in the LEI is consistent with robust economic growth in the remainder of the year. Real GDP growth for 2021 is expected to reach nearly 6.0% year-over-year, before easing to a still-robust 4.0% for 2022.”

Thoughts

The “Whack a Mole” world we seem to be living in continues. Most of the folks we talk with seem to feel that is a good description. If one thing gets fixed, something else comes along as an issue.

We won’t get into all the intricacies of those issues as most of you are living with them every day. In most stories we read today, the issues at the ports for the most part are a real mess and the backlog is so big, it is questionable how soon it can be fixed.

The cost of materials keeps going up and is really becoming a problem for people quoting prices for future delivery. One non-furniture client reported they are taking orders for their products but not quoting prices until closer to time to make the product. Could custom order furniture pull that off? Or imported case good suites? Maybe not, but it is an interesting concept to consider.

Labor seems to be getting a bit better but so many people that left the workforce have decided not to come back, even with unemployment payments being cut. But most we talk with are getting more people in the door to interview. The next concern is retaining the talent once found.

While confidence is down some, most feel that the economy should continue to be positive into 2022. The new COVID variant has spooked some people and vaccinations are still an issue, depending on which side you are on. The stock market is also becoming unpredictable, unfortunately right here coming into High Point Market time. Let’s hope we can get the COVID issue settled down as we get closer to 2022.

We hope to see all of you here in High Point in October.