Furniture Insight

US Furniture Insights

Executive Summary (July 2019 Report)

According to our latest survey of residential furniture manufacturers and distributors, new orders in May were down again, falling 3% compared to May 2018. The decline in orders in May was the fourth consecutive month of declining orders. Approximately 59% of the participants reported reduced orders.

Year-to-date, new orders remained 3% below the first five months of last year with 64% of the participants reporting reduced orders. Last year, new orders year-to-date through May were up 6% so maybe the decline this year is not quite as bad as it might seem.

Shipments were down 3% from May 2018, bringing year-to-date shipments down to a 1% increase so far this year. Backlogs in May were up 1% over April but down 2% from May 2018. Receivable levels, up 5% over May 2018, seemed a bit out of line compared to shipments, but shipments in May were up 7% over April so this issue is hopefully one of timing. Inventories remained at high levels, up 12% over May 2018. Some of this could be tariff related, but inventory levels need to be watched. Factory and warehouse employee levels and payrolls were a bit high but not too much out of line. Due to a shortage of workers in many areas, we think overall wages are up plus high turnover and training costs are hurting some participants.

Consumer Confidence

The Conference Board Consumer Confidence Index “rebounded” in July after declining in June. Both the Present Situation Index and the Expectations Index increased significantly. The overall index came in at the highest point this year. Consumers were favorable towards current and prospective business and labor market conditions. Expectations regarding their financial outlook also improved.

The University of Michigan Consumer Sentiment Survey was not as positive but being somewhat unchanged was noted as positive. Much of the focus of their report centered around inflation expectations which were not expected to be an issue short-term.

Housing

Existing home sales fell in June after gains reported in May. Overall sales were down 1.7% from May (single-family sales off 1.5%). Regionally, sales were off from a year ago in all four regions of the country.

Lawrence Yun, NAR’s chief economist, noted there was an imbalance for mid-to-lower priced homes with solid demand and insufficient supply, pushing prices up.

New single-family home sales in June were 4.5% ahead of June a year ago, with sales up in the South and West, but down 50% in the Northeast and 17.6% in the Midwest.

Housing starts were off slightly from May 2019 but were 6.2% ahead of June 2018. Starts were up in the Midwest and South, but were down in the Northeast and West.

Other

Gross domestic product rose 2.1% in the second quarter according to early estimates released by the Commerce Department. The report noted that the economy has slowed somewhat after the effects of tax cuts and government spending had given the economy a jolt.

Advance estimates for U.S. retail and food services for June 2019 showed an increase of 0.4% from the previous month and up 3.4% from June 2018. Sales at furniture and home furnishing stores were up 0.8% from June 2018 but down 0.8% year-to-date from the first half of 2018.

The Consumer Price Index increased 0.1% and increased 1.6% over the last 12 months. Increases noted in shelter, apparel and used cars and trucks were offset by declines in the energy index. The food index unchanged though food away from home increased but food at home declined. Non-farm employment increased 224,000 after a disappointing 75,000 increase last month. Gains were reported for professional and business services, healthcare and in transportation and warehousing.

Thoughts

Once again, the latest survey continued to support what we had been hearing regarding slower business. And, we are not really hearing much encouragement for June-July results. We hear a few comments regarding some pickups here and there, but there certainly is no consistency, even when talking to folks selling the same categories.

We do need to keep in mind that we are comparing to pretty good numbers last year, so it is not like we are declining after prior year declines. But still the feeling is that business is soft. Even those doing well one month or quarter are not always able to put two periods back to back.

The very positive Consumer Confidence report was good new even though it does not seem to be bleeding over into furniture sales. It is interesting that the GDP report noted that consumer spending was holding up the economy while their feeling was that the economy in general is slowing, mainly due to slower business spending. So it does appear the strong consumer confidence is impacting the economy.

We have always said that the industry does not do well when confidence is down. And we always believed it performed better when there was strong confidence.

We wonder why that is not working as well this time. We hope to see some pickup after summer vacations, etc. We will need some before the political ads start and all the news goes to elections.

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