Furniture insights  

US Furniture Insights - Executive Summary (August 2016 Report)

by Kenneth D. Smith, CPA, Smith Leonard PLLC

Executive Summary

The results of our recent survey of residential furniture manufacturers and distributors were a bit surprising. After new orders in July were 5 percent lower than July 2015 orders, August 2016 orders increased 6 percent over August 2015 orders. We think that maybe there was a timing issue between the two months.

The year-to-date results seem to tell more of the story for the year. Year-todate, new orders were up 1 percent over the first eight months of 2015. Only 44 percent of the participants reported increased orders over last year. In 2015, new orders were up 5 percent over the first eight months of 2014.

Shipments in August were up 6 percent over August 2015, following a 9 percent decrease reported in July. This increase brought shipments year-to-date back to about even with the same period a year ago. Only 42 percent of the participants reported increased shipments yearto- date.

Backlogs fell 2 percent from July and were also 2 percent lower than August 2015. August 2015 backlogs were 5 percent higher than August 2014 levels. Receivable levels continue to be in good shape, down 4 percent from a year ago. Considering shipments year-to-date are flat, the decrease in receivables indicates they are in good shape. Inventories also appear to be at good levels, down 1 percent from last year and down 1 percent from July.

Factory and warehouse payrolls are up 1 percent over last yearto- date. The number of factory and warehouse employees was also up 1 percent over last year. Each of these comparisons seem very much in line with current business conditions.

Consumer confidence fell in October after an increase reported in September and August. The report indicated that “consumers assessment of current business and employment conditions softened while optimism regarding the short term outlook retreated somewhat.”
The advance estimates for Gross Domestic Product (GDP) indicated a solid 2.9 percent growth rate for the third quarter of 2016. The Conference Board’s Leading Economic Index also increased 0.2 percent after a 0.2 percent decline in August.

Total existing home sales increased 3.2 percent in September while single-family home sales increased 4.1 percent. All four regions of the country reported increased sales, with the Northeast leading the way with a 5.7 percent increase. Sales of new single-family houses in September increased 3.1 percent over August and were 29.8 percent above September 2015. Compared to September 2015, all four regions of the country were up substantially.
Privately-owned housing starts were down 9 percent from August and were also down 11.9 percent from September 2015. But single-family housing starts were up 8.1 percent over August and up 5.4 percent from September 2015. Single-family starts were up in all four regions of the country.

Retail and food services sales in September were up 0.6 percent from August and 2.7 percent over September 2015. Retail trade sales were also up 0.6 percent from August and up 2.2 percent over September 2015. Sales at furniture and home furnishings stores were up 2.7 percent over September 2015 and up 3.8 percent year-to-date according to the advance reports from the Census Bureau.
The Consumer Price Index increased 0.3 percent in September. Over the last twelve months, the all items index rose 1.5 percent, up from 1.1 percent reported last month. Increases in shelter and gasoline indexes were reported as the main cause for the increase.
156,000 jobs were added in September. The unemployment rate was little changed at 5.0 percent.

Overall, as we have noted before, most of the indicators that we have tracked are good for the industry. While not robust, the stock market has performed reasonably well. Consumer Confidence seems to be the main thing holding us back.

We talked to quite a number of people at the High Point Market and most all agreed that the negative political campaigns are the main cause for lack of confidence. In addition, at many places, there is little advertising space available and any time available away from politics, is extremely expensive. But most of the folks we talked with seemed to agree that while business is not great, it is not at all bad either. It just isn’t consistent.

That said, the Market was interesting to us. Friday and Saturday most of our talks indicated that “the big guys” were all here Wednesday to Saturday. But by Saturday night, we were not feeling much of a buzz. Then Sunday came and it was like someone flipped a switch. Sunday, Monday and most of Tuesday seemed to have a great feeling with seemingly really good “traffic” and the mood really picked up. Overall, we thought the Market was a good one. As best we could figure, it was like people realized the elections would be over soon, all the negative ads would go away and we would get back to business. So it appeared that buyers figured they need to be ready with fresh new product. We hope your was a good one—buyer or seller.