Consumer confidence remains high, but that faith isn’t playing out in the retail furniture sector.
New furniture orders dipped 9 percent in April compared with the same month last year, the third straight month of declining orders, according to the latest Furniture Insights survey, released July 1. That trend isn’t about to reverse itself for at least another two months.
The survey, conducted monthly by High Point accounting and consulting firm Smith Leonard, polls residential furniture manufacturers and distributors. April’s decline continues a trend started in February, which experienced a 5 percent decline over the same month last year, and then March, which fell 3 percent.
April’s numbers put year-to-date orders, which were flat through March, down 3 percent. Only 36 percent of manufacturers surveyed reported an increase in April orders. Year to date, new orders were down for 64 percent of participating manufacturers.
The results are not surprising given what Smith Leonard partner Ken Smith heard while attending market and in the weeks immediately after. Smith says a reverse in orders might not come until later this summer.
“The not-so-good news is that we are not hearing much excitement even into June,” said Smith. “We continue to hear mixed results in conversations and our surveys seem to prove what we hear. Not every (manufacturer) is down but clearly the majority are. Even so, some that are down are not down that much, so that is why we continue to call the current business conditions ‘choppy’ or even worse for some.
Despite the decline in new orders, Smith said consumer confidence remains high. “We continue to hear that trade and tariff talks bother consumers, even though we know all furniture is not impacted – but consumers apparently don’t understand that. Plus, normal political rhetoric on both sides does not give folks a lot of comfort. What did we do when we did not have news 24/7 and so many ways to get it?”
Other manufacturing insights from the survey:
Shipments and backlogs
Shipments in April were down 2 percent from April 2018. Shipments were down for 55 percent of manufacturers participating in the survey. Shipments in April in dollars were about the same as orders. Year to date, shipments were up 2 percent compared to a 3 percent increase last month. But only 48 percent of participating manufacturers reported increased shipments year to date.
Receivables and inventories
Receivable levels enjoyed a 3 percent increase in April compared to April of last year. April’s receivable levels were 3 percent lower than March’s, also out of line with the decrease in shipments of 11 percent for the same period. Smith said the increase over April 2018 was a bit out of line, but not all that out of line with the year-to-date shipment increase. “So overall, receivables may still be in decent shape,” he said.
Inventories were 8 percent higher in April compared with the same month a year ago, up from 6 percent reported last month. While only 55 percent of the participants reported increased inventories, several large participants reported significant increases over last year. But inventories were only up 1 percent over March, so the poor results of April orders made the increase in inventories over last year seem even worse.
“Clearly, inventory levels need watching, especially if this slowdown in orders continues,” said Smith.
Existing home sales
Existing home sales rebounded in May, recording an increase in sales for the first time in two months, according to the National Association of Realtors. Each of the four major U.S. regions saw a growth in sales, with the Northeast experiencing the biggest surge last month.
Total existing home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, jumped 2.5 percent from April to a seasonally adjusted annual rate of 5.34 million in May.
Total sales, however, remain down 1.1 percent from a year ago (5.4 million in May 2018). Single-family home sales sat at a seasonally adjusted annual rate of 4.75 million in May, up from 4.63 million in April and down 0.8 percent from 4.79 million a year ago.
The median existing single-family home price was $280,200 in May, up 4.6 percent from May 2018. Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 590,000 units in May, up 1.7 percent from the prior month and down 3.3 percent from a year ago. The median existing condo price was $257,100 in May, which was up 5.4 percent from a year ago.
Robert Bell is the author of the Home Furnishings Association’s Shop Talk blog.