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Monthly Results New Orders New orders in September 2008 were 12 percent below September 2007 order levels, according to our recent survey of residential furniture manufacturers and distributors. On a good note, orders were 15 percent higher than August 2008 orders, although it is normal to see orders increase fairly substantially from August to September. September was the fourth straight month that orders decreased by double digits compared to the same month a year ago. Year-to-date, new orders remained 10 percent below the first nine months of 2007. The first nine months of 2007 orders were 4 percent below the same period in 2006. Consistent with August results, some 86 percent of the partici-pants have reported lower order rates year-to-date for 2008. Approximately 49 percent of the participants have reported lower orders of more than 10 percent. Shipments and Backlogs Shipments for September 2008 were 14 percent lower than September 2007, but were up 3 percent over August. September was the fourth out of the last five months where shipments were below the prior year same month by 10 percent or more. Year-to-date, shipments fell to 10 percent below the same period a year-ago, up from 9 percent in August. Shipments declined year-to-date for 84 percent of the participants. Some 46 percent of the participants reported shipments down by over 10 percent. Backlogs improved 3 percent over August as orders exceeded shipments. Backlogs were 15 percent below September 2007, down slightly from the August year over year decline of 16 percent. Receivables and Inventories Receivable levels were 11 percent lower in September 2008 compared to September 2007. With shipments down 14 percent, the 11 percent decline was a bit out of line. On the other hand, receivables were down 2 percent in September versus August in spite of a 3 percent increase in shipments. Overall, while we know everyone is concerned over retailer credit, it appears that we were not off too far in September. We are concerned that October results may not be as good. Inventories were even with August levels and down 4 percent from last year. These results were consistent with the August comparisons. So while these results are somewhat out of line with orders and shipments, it appears that we are not, as a whole, building inventories. Factory Employees and Payrolls The number of factory employees was flat in September compared to August, when they were 3 percent lower than July. The number of employees was down 13 percent compared to September a year ago, the same as reported for August. September 2007 numbers were off 10 percent from September 2006. Factory payrolls were up 4 percent over August. These payrolls were down 17 percent compared to September a year ago. With the number of employees down 13 percent, the differential appears to reflect some short-time being worked by the employees. Year-to-date, these payrolls remained 12 percent below a year ago. In 2007, the payrolls for the first nine months were off 8 percent compared to the same period in 2006. National Consumer Confidence The Conference Board Consumer Confidence Index improved moderately in November after reaching an all time low in October. The index in November was 44.9, up from 38.8 in October. The Present Situation Index fell to 42.2 from 43.5 last month. The Expectations Index increased to 46.7 from 35.7 in October. Lynn Franco, Director of The Conference Board Consumer Research Center said: “The persistent declines in the Present Situation Index suggest that the economy has weakened further in the final months of this year. Inflation expecta-tions, which have been at historically high levels in recent months, subsided considerably as a result of falling gas prices. But, despite the improvement in the Expectations Index this month, consumers remain extremely pessimistic and the possibility that economic growth will improve in the first half of 2009 remains highly unlikely. Consumers’ assessment of current conditions deteriorated further in November. Those claiming business conditions are “bad” increased to 40.3 percent from 37.1 percent, while those claiming business conditions are “good” edged up to 9.9 percent from 9.4 percent last month. Consumers’ assessment of the labor market was more negative than a month ago. Those saying jobs are “hard to get” rose to 37.2 percent from 36.6 percent in October, while those claiming jobs are “plentiful” decreased to 8.8 percent from 9.0 percent. Consumers’ short-term outlook was less pessimistic. Those anticipating business conditions to worsen over the next six months declined to 28.1 percent from 36.5 percent, while those expecting conditions to improve rose to 11.4 percent from 9.6 percent.” The Surveys of Consumers from the Reuters/University of Michigan report was not as positive. The Index of Consumer Sentiment fell to 55.3 from 57.6 in October. The Current Economic Conditions Index fell to 57.5 from 58.4 and the Index of Consumer Expectations fell to 53.9 from 57.0. Richard Curtin, the Director of the Survey said in his report: “Consumers have expressed the most pessimistic economic outlook in the past quarter century just as the holiday shopping season gets underway. Consumer confidence fell in the last half of November due to mounting job losses, falling incomes, and the evaporation of household wealth. There have been only two surveys during the past half century that found consumers more pessimistic than now, in April and May of 1980―the all-time low was 51.7, a mere 3.6 Index-points below the current figure. Consumers were unanimous in their recognition that the economy was in recession, and nearly three-in-four expected the recession to deepen in the months ahead. The economic downturn was anticipated to prompt a stunning decline in the inflation rate: 39 percent of all consumers in November expected a zero inflation rate or outright deflation, up from just 5 percent six months ago. Even the plunge in gas prices was unable to overcome consumers’ heightened uncer-tainty about future job and income prospects. Although their reluctance to make discretionary purchases is primarily due to job and income uncertainty, consumers’ desire to increase their saving and reserve funds as well as stringent limitation of the availability of credit will also curtail spending. Overall, the data indicate the bleakest holiday spending season since 1980, with declines in consumer spending lasting until the 4th quarter of 2009. Total consumption expenditures are expected to fall by about -1.0 percent in 2009. Few consumers expect the recession to end anytime soon as just 14 percent of all consumers in November expected the return of good times financially in the economy during the year ahead. When asked to identify what economic news they had heard, half of all consumers reported rising unemployment, up from one-in-three in October and one-in-four last November. An increase in the unemployment rate was expected by 69 percent of all consumers in November, a level that has only been exceeded in one prior survey―72 percent in 1980. The data indicate that consumers now expect the unemployment rate to be 8.5 percent by year-end 2009. Given these dismal job expectations, it is easy to understand their planned steep cutbacks in discretionary spending. Despite the substantial boost in spending power provided by falling gas prices, more families reported that their finances had worsened in November than ever before in the long history of the surveys―61 percent. When asked to explain how their finances had changed, income increases were mentioned by the fewest consumers in more that a half century―by just 15 percent. Real income expectations improved over the lows recorded at mid year due to the expected declines in the inflation rate, but still remained decidedly negative due to lower nominal income expectations. Overall, 44 percent expected declining real incomes. The November survey recorded the most negative buying plans in the past quarter century for appliances, furniture, home electronics and other household durables; indeed, there was only one other survey conducted in 1980 that recorded less favorable buying plans. When asked to explain their views, more consumers than ever before (47 percent) mentioned their uncertainty about future job and income prospects as the primary reason to postpone planned purchases. Consumers viewed vehicle buying conditions from two fundamentally different vantage points: while unusually deep price discounts on new vehicles were anticipated by the majority of consumers in November, and all-time record number of consumers also stated that their uncertainty about future job and income prospects meant that they would not even consider purchasing a vehicle.” Gross Domestic Product (GDP) According to the Bureau of Economic Analysis third quarter preliminary report, the GDP decreased at an annual rate of 0.5 percent in the third quarter of 2008. This was up from last month’s preliminary estimate of 0.3 percent. The reasons for the decrease were the same as reported last month on an overall basis. The reasons for the declines from preliminary estimates reflected downward revisions in personal consumption expenditures and exports that were partially offset by an upward revision to private nonfarm inventory investment and a downward revision to imports. Leading Economic Indicators The Conference Board announced that the U.S. leading index decreased 0.8 percent, the coincident index increased 0.2 percent and the lagging index increased 0.1 percent in October. The report indicated that the leading index declined sharply in October as stock prices, building permits, consumer expectations and the index of supplier deliveries made large negative contribu-tions to the index, despite continued positive contributions from real money supply and the interest rate spread. In the past two months, without the very large positive contributions from inflation–adjusted money supply (the largest in seven years), the leading index would have been substantially weaker. Between April and October 2008, the leading index declined 2.4 percent (a -4.7 percent annual rate), falling considerably faster than the 1.2 percent decrease (a -2.3 percent annual rate) over the previous six months. In addition, the weaknesses among the leading indicators have remained widespread in recent months. The coincident index increased in October, following five consecutive monthly declines. Industrial production recovered from its sharp September drop (partially due to two large hurricanes during that month), more than offsetting the continued decline in employment. Housing Existing-Home Sales Existing-home sales declined after strong gains in September as uncertainty and economic concerns increased in October, according to the National Association of Realtors® (NAR). Lawrence Yun, NAR chief economist, said consumer hesitation is understandable. “Many potential home buyers appear to have withdrawn from the market due to the stock market collapse and deteriorating economic conditions,” he said. “We have favorable affordability conditions, but we need more than that to give buyers with jobs the confidence they need. This is why a housing stimulus is so critical now to encourage more buyers to draw down the inventory and stabilize home prices. Without home price stabilization, there will not be an economic recovery.” Single-family home sales declined 3.3 percent to a seasonally adjusted annual rate of 4.43 million in October from a level of 4.58 million in September, but are unchanged from a 4.43 million-unit pace in October 2007. The median existing single-family home price was $181,800 in October, down 11.2 percent from a year ago. Existing-home sales – including single-family, townhomes, condominiums and co-ops – fell 3.1 percent to a seasonally adjusted annual rate of 4.98 million units in October from a downwardly revised pace of 5.14 million in September, and are 1.6 percent below the 5.06 million-unit level in October 2007. Total housing inventory at the end of October slipped 0.9 percent to 4.23 million existing homes available for sale, which represents a 10.2-month supply at the current sales pace, up from a 10.0-month supply in September. Even with the overall decline, Yun identified a number of areas with solid sales gains from a year ago, including many California and Florida markets, as seen previously, as well as Boston, Minneapolis, and Denver. Regionally, existing-home sales in the Northeast slipped 1.2 percent to an annual pace of 830,000 in October, and are 9.8 percent lower than a year ago. The median price in the Northeast was $241,700, down 9.8 percent from October 2007. Existing-home sales in the West eased by 1.6 percent to an annual rate of 1.21 million in October but are 37.5 percent higher than October 2007. The median price in the West was $231,400, down 27.0 percent from a year ago. In the South, existing-home sales declined 3.2 percent to an annual pace of 1.84 million in October, and are 10.2 percent below a year ago. The median price in the South was $161,100, which is 5.8 percent lower than October 2007. Existing-home sales in the Midwest fell 6.0 percent in October to a pace of 1.10 million and remain 9.1 percent below October 2007. The median price in the Midwest was $149,400, down 6.7 percent from a year ago. New Home Sales Sales of new one-family houses in October 2008 were at a seasonally adjusted annual rate of 433,000, according to estimates released by the U.S. Census Bureau. These sales were 5.3 percent below the revised September results and were 40.1 percent below the October 2007 estimate. The median price of new houses sold in October 2008 was $218,000, while the average price was $272,300. The report indicated that there was a 11.1-month supply of new homes for sale. Housing Starts Single family housing starts in October were at a rate of 531,000 according to the U.S. Census Bureau. This rate was 3.3 percent below the September rate. All privately-owned housing starts were at a seasonally adjusted annual rate of 791,000 or 4.5 percent below September. The October results were 38 percent below October 2007. Retail Sales The U.S. Census Bureau announced that advance estimates of U.S. retail and food services sales for October, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $363.7 billion, a decrease of 2.8 percent from the previous month and 4.1 percent below October 2007. Total sales for the August through October 2008 period were down 1.3 percent from the same period a year ago. Retail trade sales were down 3.1 percent from September 2008 and were 5.0 percent below last year. Motor vehicle and parts dealers sales were down 23.4 percent from October 2007. Sales of furniture and home furnishings stores sales were down 13.5 percent from last year on an adjusted basis and were down 2.5 percent from September. Year-to-date, sales at these stores now indicate a 7 percent decline. Only sales at auto and other motor vehicle dealers have reported lower year-to-date results (a decline of 10.9 percent). Consumer Prices The Consumer Price Index for All Urban Consumers (CPI-U) decreased 1.0 percent in October, before seasonal adjustment, according to the Bureau of Labor Statistics of the U.S. Department of Labor. The October level was 3.7 percent higher than in October 2007. On a seasonally adjusted basis, the CPI-U decreased 1.0 percent in October following very little change in September and August. The large October decline was the largest one month decrease since publication of seasonally adjusted changes began in February 1947. Compared to a year ago, the October index was up 3.7 percent. The energy index fell 8.6 percent in October following declines of 1.9 percent in September and 3.1 percent in August. Motor fuel prices continued to decline in October, with the gasoline index falling 14.2 percent. Despite the decline, gasoline prices remained 12.0 percent above their October 2007 level. The index for household energy items declined 0.9 percent following a 3.4 percent decrease in September. The food index increased 0.3 percent in October, a smaller advance than the average monthly increase of 0.7 percent during the June through September period. Compared with a year earlier, the food index was up 6.3 percent. The index for all items less food and energy turned down in October, declining 0.1 percent to a level 2.2 percent above October 2007. Contributing to the decrease in October were declines of 1.0 percent in the apparel index, 4.8 percent in the airline fare index, 1.6 percent in the index for lodging away from home, and 0.7 percent in the index for new and used motor vehicles. Employment Nonfarm payroll employment fell by 240,000 in October, and the unemploy-ment rate rose from 6.1 to 6.5 percent, according to the Bureau of Labor Statistics of the U.S. Department of Labor. October’s drop in payroll employment followed declines of 127,000 in August and 284,000 in September, as revised. Employment has fallen by 1.2 million in the first 10 months of 2008; over half of the decrease has occurred in the past 3 months. In October, job losses continued in manufacturing, construction, and several service-providing industries. Health care and mining continued to add jobs. The unemployment rate rose by 0.4 percentage point to 6.5 percent in October, and the number of unemployed persons increased by 603,000 to 10.1 million. Over the past 12 months, the number of unemployed persons has increased by 2.8 million, and the unemployment rate has risen by 1.7 percentage points. Durable Goods Orders and Factory Shipments The U.S. Census Bureau reported new orders for manufactured durable goods in October decreased $12.7 billion or 6.2 percent to $193.0 billion. This was the largest percent decrease in new orders since October 2006 and followed two consecutive monthly decreases including a 0.2 percent September decrease. Excluding transportation, new orders decreased 4.4 percent. Excluding defense, new orders decreased 4.6 percent. Transportation equipment, down two of the last three months, had the largest decrease, $6.1 billion or 11.1 percent to $49.0 billion. Shipments of manufactured durable goods in October, down three consecutive months, decreased $5.0 billion or 2.4 percent to $202.9 billion. This followed a 0.2 percent September decrease. Transportation equipment, down two of the last three months, had the largest decrease, $2.4 billion or 4.6 percent to $48.3 billion. According to the U.S. Census Bureau September report, shipments of furniture and related products decreased 6.2 percent in September. The report indicated that year-to-date, sales of these products were down 5.3 percent. The primary industries with larger declines were transportation equipment, audio and video equipment, photographic equipment and industrial equipment. Orders for furniture and related products were reported down 9.7 percent comparing September 2008 to September 2007. Summary The results for August were not unexpected based on what we heard in late summer from various sources. Unfortunately, we do not expect very much improvement for the rest of the year. As we noted in the reports on consumer confidence, there are many things on consumers’ minds these days, and buying articles they really do not have to buy is not really one of those things. The housing report was somewhat encouraging as the decline in sales of existing homes seems to have leveled off at least in the last two months. Certain areas of the country seem to be showing some signs of life. If the government can ever figure out how to deal with the mortgage crisis and calm those waters down, we think housing may eventually bottom out. Unfortunately, most of what we hear on the news is bad. It does appear the Black Friday was much better than expected, even considering low expectations. The question is how much did the retailers give up in profits in order to get the sales. We realize that we say this a lot, but we need to keep in mind that furniture is still being sold. People are getting married and moving to new homes and people are still having babies that need new furniture. Kids are growing out of cribs and kids are graduating from schools and moving out from home. Even if Mom and Dad give them the old furniture, Mom and Dad have to replace the old stuff. We were pleased to note that the government has officially announced that we are in a recession. Generally it has been thought that we are in one for six months before it becomes “official.” Hopefully that means we will not have too many more months to deal with it. On the other good news front, gas prices have dropped dramatically. This is at least easing the burden on consumers’ billfolds. If we can get some stability in the stock markets and the banking world, consumers should start to feel a bit better. So as we have said before, tighten the belts and hang on. Move to conserve and/or create cash by ridding your Company of any unneeded assets. We continue to believe that those who are left standing will prosper in the long run. In the meantime, there will be some tough times, likely at least through the early part of 2009 if not all of it. Monthly Survey Of Furniture Business From Smith Leonard Accountants & Consultants Tuesday, November 04, 2008 By: Furniture World Magazine Print Page | Send This Article By E-mail | Click to Review Browse all articles See most recent Article by Category Latest Furniture Industry News Conn’s, Inc. Reports Record Results for Black Friday Weekend Product sales and service maintenance agreement sales rose approximately 23% during the month of November 2008. Jennifer Convertibles Reports Results for Fourth Quarter and Fiscal Year End or the fourth quarter, revenue from continuing operations decreased by 16.3% to $30.8 million. 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Prolific Design Legend, Carlton Varney To Speak At Las Vegas Design Center “First Friday” at Las Vegas Design Center features educational opportunities, unique showroom specials, hospitality and other exclusive offerings for the trade. Weekly Web Tip For Furniture Retailers #2 If you have a website, you need search engine optimization (SEO). But what does that mean? Don't Wait! 10 Things Furniture Businesses Must Do Now As a furniture business owner, manager or leader your choice is simple. Do what you know you need to do and do it fast, or die a slow death. Browse All Industry News Monthly Results New Orders New orders for August fell 16 percent from August 2007 levels according to our recent survey of residential furniture manufacturers and distributors. This marked the third month in a row that orders were down double digits. Approximately 83 percent of the participants reported declines in orders, and as with the last few months, several reported significant double digit declines. The decline in August pushed the year-to-date decline up to 10 percent for the first eight months. Some 86 percent of the participants have reported lower orders than the first eight months. From street talk since August and through market, we do not expect to see significant rebounds in orders in September and October. Shipments and Backlogs Shipments were also down 16 percent in August 2008 compared to August of 2007. We did see an increase from July 2008, but that is somewhat normal with the normal three week work month due to the holiday in July. Year-to-date, shipments declined 9 percent from the same period a year ago, up from 8 percent last month. As with orders, some 86 percent of the participants are reporting lower shipments than last year, with several down significant double digits. Backlogs were also down 16 percent from last year and were down 7 percent from July. Backlogs are at seriously low levels. Receivables and Inventories Receivable levels fell 6 percent from last August. While not far off from year-to-date shipments declines of 9 percent, the decline is not as much in line with the last two months declines in shipments. We know there is some extended dating going on, but we are also hearing a lot about delinquent payments from retailers. Inventory levels fell 4 percent from last year’s levels and were even with July levels. The 4 percent decline was the same as the decline reported in July. We suspect that with orders continuing to decline, inventory levels may be a bit high. Factory Employees and Payrolls The number of factory employees fell 3 percent from July bringing the total number compared to last year down to a 13 percent decrease. This decrease was up from a 10 percent decline in July and 9 percent in June. Factory payrolls in August were 18 percent below August 2007, up from 10 percent last month. Factory payrolls were up 13 percent over July but that increase was due to the shutdown for most companies over the week of the 4th of July. National Consumer Confidence The Conference Board Consumer Confidence Index fell to an all time low in October after a slight gain in September. The index now stands at 38.0 (1985 = 100), far below the 61.4 reached in September. The Present Situation Index decreased from 61.1 last month to 41.9 in October. The Expectations Index declined to 35.5 from 61.5 in September. Lynn Franco, Director of The Conference Board Consumer Research Center said: “The impact of the financial crisis over the last several weeks has clearly taken a toll on consumers’ confidence. The decline in the Index (-23.4 points) is the third largest in the history of the series, and the lowest reading on record. In assessing current conditions, consumers rated the labor market and business conditions much less favorably, suggesting that the fourth quarter is off to a weaker start than the third quarter. Looking ahead, consumers are extremely pessimistic, and a significantly larger proportion than last month foresees business and labor market conditions worsening. Their earnings outlook, as well as inflation outlook, is also more pessimistic, and this news does not bode well for retailers who are already bracing for what is shaping up to be a very challenging holiday season.” Consumers’ appraisal of current conditions deteriorated sharply in October. Those saying business conditions are “bad” increased to 38.3 percent from 33.4 percent, while those claiming business conditions are “good” declined to 9.2 percent from 12.8 percent. Consumers’ assessment of the labor market was also much more negative. The percentage of consumers saying jobs are “hard to get” rose to 37.2 percent from 32.2 percent in September, while those claiming jobs are “plentiful” decreased to 8.9 percent from 12.6 percent. Consumers’ short-term outlook turned significantly more pessimistic. Those expecting business conditions to worsen over the next six months surged to 36.6 percent from 21.0 percent, while those anticipating conditions to improve fell to 9.9 percent from 13.4 percent. The outlook for the job market was also less favorable. The percent of consumers expecting fewer jobs in the months ahead surged to 41.5 percent from 26.9 percent, while those anticipating more jobs decreased to 7.4 percent from 11.9 percent. The Reuters/University of Michigan Surveys of Consumers report also indicated falling confidence. Their Index of Consumer Sentiment was 57.6 in October, a record 12.7 points below the 70.3 in September and 23.3 points below October 2007. Since the peak in January 2007, the Sentiment Index has declined 41 percent, the largest peak to trough decline in the history of the survey. The Index of Consumer Expectations was 57.0 in October, down from 67.2 in September and 70.1 in October 2007. The Expectations Index has declined 35 percent since the January 2007 peak. “Consumer confidence had already declined by mid 2008 by more than prior to any past recession and the steep October loss indicates that accelerated cutbacks in spending can be expected during the months ahead,” according to Richard Curtin, the Director of the Reuters/University of Michigan Surveys of Consumers. Overall, the data indicate that this will be the bleakest holiday spending season since 1980. “Consumers held the least favorable assessments of their finances in more than a half century and viewed their job prospects more negatively than at any other time since the end of 1980,” according to Curtin. The data indicate that a long and deep recession is likely to occur, with spending expected to decline through most of 2009. Consumers anticipated an unemployment rate reaching 8 percent by the end of 2009. Total real personal consumption expenditures are expected to fall by -0.50 percent to -0.75 percent in 2009 compared with 2008, followed by unusually slow paced recovery in 2010. Consumers reported the most dismal assessments of their current financial situation ever recorded. Just one-in-five consumers reported that their finances had improved in October. Three times as many reported financial reversals. Declines in gas prices could not offset the larger negative impact of widespread income declines. “More families reported income declines in October than in any other survey during the past half century,” noted Curtin. Restrictions on available credit as well as heightened uncertainty about future job and income prospects have caused more consumers to postpone purchases. When asked to explain their buying plans, more than half of all consumers cited losses and uncertainty about jobs and incomes than ever before in the sixty year history of the surveys. This was true for vehicles as well as for furniture, appliances, home electronics, and other durables. “The more the purchase was associated with the use of credit, the more likely consumers voiced their intent to postpone the purchase,” Curtin said. Tightening credit conditions have increasingly constrained purchase plans, with one-in-ten consumers mentioning that they had recent problems obtaining credit. Gross Domestic Product (GDP) According to the Bureau of Economic Analysis, real gross domestic product – the output of goods and services produced by labor and property located in the United States – decreased at an annual rate of 0.3 percent in the third quarter of 2008, (that is, from the second quarter to the third quarter), according to advance estimates released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 2.8 percent. The decrease in real GDP in the third quarter primarily reflected negative contributions from personal consumption expenditures (PCE), residential fixed investment, and equipment and software that were largely offset by positive contributions from federal government spending, exports, private inventory investment, nonresidential structures, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased. Most of the major components contributed to the downturn in real GDP growth in the third quarter. The largest contributors were a sharp downturn in PCE for nondurable goods, a smaller decrease in imports, a larger decrease in PCE for durable goods, and a deceleration in exports. Notable offsets were an upturn in inventory investment and acceleration in federal government spending. Leading Economic Indicators The Conference Board reported that the U.S. leading index increased 0.3 percent, the coincident index decreased 0.5 percent and the lagging index decreased 0.2 percent in September. The leading index increased in September due primarily to positive contributions from real money supply, consumer expectations, the interest rate spread, and the index of supplier deliveries, more than offsetting the negative contributions from building permits, stock prices, initial claims for unemployment insurance (inverted) and the average workweek in manufacturing. However, the weaknesses among the leading indicators have remained widespread over the past six months and will likely continue based on October results. With consistently widespread weakness among its components, the leading index has been falling since July 2007. Following the leading index, the coincident index, a monthly measure of current economic conditions, has also been decreasing, and its rate of decline has accelerated in recent months. Meanwhile, real GDP growth slowed to a 1.8 percent average annual rate in the first half of the year, down from an average annual rate of 2.3 percent in the second half of 2007. Taken together, the behavior of the composite indexes suggests that the economy is unlikely to improve in the near term. Housing Existing-Home Sales According to the National Association of Realtors® (NAR), existing-home sales increased in September. Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 5.5 percent to a seasonally adjusted annual rate of 5.18 million units in September from a level of 4.91 million in August, and are 1.4 percent higher than the 5.11 million-unit pace in September 2007. ingle-family home sales increased 6.2 percent to a seasonally adjusted annual rate of 4.62 million in September from a pace of 4.35 million in August, and are 3.8 percent above the 4.45 million-unit level a year ago. The median existing single-family home price was $190,600 in September, which is 8.6 percent below September 2007. Lawrence Yun, NAR chief economist, said more markets are seeing year-over-year gains. “The sales turnaround which began in California several months ago is broadening now to Colorado, Kansas, Minnesota, Missouri and Rhode Island,” he said. “The South was hampered by much lower home sales in Houston in the aftermath of Hurricane Ike.” NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, California, said low home prices and low interest rates have been attracting buyers. “This is the first time since November 2005 that home sales have been above year-ago levels,” he said. “Credit tightened at the end of September, but the improvement demonstrates that buyers who’ve been on the sidelines want to get into the market to make a long-term investment in their future.” Total housing inventory at the end of September fell 1.6 percent to 4.27 million existing homes available for sale, which represents a 9.9-month supply at the current sales pace, down from a 10.6-month supply in August. This marks two consecutive monthly declines since inventories peaked in July. The national median existing-home price for all housing types was $191,600 in September, down 9.0 percent from a year ago when the median was $210,500. “Compared to a fairly small share of foreclosures or short sales a year ago, distressed sales are currently 35 to 40 percent of transactions. These are pulling the median price down because many are being sold at discounted prices,” Yun explained. “The current market is not being dominated by speculative investors. Rather, 80 percent of current buyers are purchasing a primary residence, which is a bit higher than historic norms.” Regionally, existing-home sales in the West jumped 16.8 percent in September, and are 34.4 percent higher than September 2007. The median price in the West was $253,600, down 18.5 percent from a year ago. In the Midwest, existing-home sales increased 4.4 percent in September, but are 2.5 percent below a year ago. The median price in the Midwest was $152,500, which is 7.9 percent lower than September 2007. Existing-home sales in the South rose 2.2 percent in September but remain 7.8 percent below September 2007. The median price in the South was $167,200, down 4.1 percent from a year ago. In the Northeast, existing-home sales slipped 1.2 percent in September, and are 7.7 percent lower than a year ago. The median price in the Northeast was $246,800, down 5.4 percent from September 2007. New Home Sales Sales of new one-family houses in September 2008 were at a seasonally adjusted annual rate of 464,000, according to estimates from the U.S. Census Bureau. This was 2.7 percent above the revised August rate of 452,000 but was 33 percent below the September 2007 estimate of 694,000. The median price of new houses sold in September was $218,400 while the average sales price was $275,500. The estimate of new houses for sale at the end of September represented 10.4 months at the current sales rate. Sales in the West were up 22.7 percent over August. The South was up 0.7 percent while sales in the Midwest were off 5.8 percent and sales in the Northeast were off 21.4 percent. Housing Starts According to the U.S. Census Bureau, privately-owned housing starts in September were at a seasonally adjusted annual rate of 817,000. This was 6.3 percent below the revised August estimate and 31.1 percent below the September 2007 rate. Retail Sales The U.S. Census Bureau reported that advance estimates of U.S. retail and food services sales for September, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $375.5 billion, a decrease of 1.2 percent from the previous month and 1.0 percent below September 2007. Total sales for the July through September 2008 period were up 0.8 percent from the same period a year ago. Retail trade sales were down 1.2 percent from August 2008 and were 1.4 percent below last year. Gasoline station sales were up 17.8 percent from September 2007 and sales of food and beverage stores were up 5.1 percent from last year. Unadjusted sales in September at furniture and home furnishings stores were 8.4 percent below August and were 9.2 percent below September a year ago. On an adjusted basis, sales were 2.3 percent below August and 10.7 percent below September a year ago. Year-to-date, sales at these stores were reportedly off 6.2 percent from the first nine months of 2007. The year-to-date percentage decrease was the second highest decrease among all the categories, behind auto and other motor vehicle dealers which fell 9.3 percent. Sales year-to-date at electronics and appliance stores were up 2.5 percent. Consumer Prices The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1 percent in September, before seasonal adjustment, according to the Bureau of Labor Statistics of the U.S. Department of Labor. The September level was 4.9 percent higher than in September 2007. On a seasonally adjusted basis, the CPI-U was virtually unchanged in September following a 0.1 percent decrease in August. The index for energy fell 1.9 percent in September following a 3.1 percent decline in August. The motor fuel index declined 0.8 percent in September but was 31.8 percent higher than a year ago. The index for household energy fell 3.4 percent in September after a 1.6 percent decrease in August. The index for all items less food and energy increased 0.1 percent in September, decelerating for the second straight month. Contributing to the deceleration were downturns in the indexes for apparel and for airline fares, a smaller increase in the index for recreation, and a steeper decline in the index for new and used motor vehicles. Consumer prices increased at a seasonally adjusted annualized rate (SAAR) of 2.6 percent in the third quarter of 2008 following increases in the first and second quarters at annual rates of 3.1 and 7.9 percent, respectively. This brings the year-to-date annual rate to 4.5 percent and compares with an increase of 4.1 percent for all of 2007. The index for energy fell at a 4.9 percent annual rate in the third quarter of 2008, following increases at rates of 8.6 percent and 53.6 percent in the first two quarters, respectively. So far this year, the energy index has risen at a 16.6 percent rate after increasing 17.4 percent in all of 2007. Within energy, petroleum-based energy costs (energy commodities) advanced at a 19.1 percent rate and energy services (gas and electricity) rose at a 12.4 percent rate in the first nine months of 2008. Employment The Bureau of Labor Statistics reported that nonfarm payroll employment declined by 159,000 in September. The unemployment rate held steady at 6.1 percent after rising 0.4 percent in August. Employment continued to fall in construction, manufacturing, and retail trade, while mining and health care continued to add jobs. In September, the number of long-term unemployed (those jobless for 27 weeks or more) rose by 167,000 to 2.0 million. This represented an increase of 728,000 over the past 12 months. Durable Goods Orders and Factory Shipments According to the U.S. Census Bureau, new orders for manufactured durable goods increased 0.8 percent in September. This represented the fourth increase in the last five months. Excluding transportation, new orders decreased 1.1 percent. Excluding defense, new orders decreased 0.6 percent. Shipments of manufactured durable goods, up three of the last four months, increased 0.2 percent. This followed a 4.2 percent decrease in August. The final report for August indicated that shipments for furniture and related products fell 7 percent from August 2007 but were up 5 percent over July. Year-to-date, shipments in this category were reported to be off 5.2 percent from the same period a year ago. This same report noted that new orders in this category were off 1.9 percent from August 2007 with year-to-date orders off 4.7 percent. Summary Unfortunately, most of the national and even furniture statistics in this report do not reflect current condi-tions. October has not been good to the nation in general with the whole financial mess we are in – including the stock market, banking relations and just about all the areas in the financial world. At least the last week of October brought overall good news to the stock market. The market started the week at around 8,300 and finished off the week at 9,325. According to Bloomberg, this was the biggest weekly gain since 1974. October saw the largest drop in the S&P 500 since 1987, but the rally at the end of the month was certainly some good news among all the bad we have been hearing. The High Point Market seemed to beat most exhibitors’ expectations, which admittedly were low. Yet the players were here and they placed some orders. Many of the retailers we heard from did not need to buy a lot, but the smart ones know they needed to freshen their floors for when business does get better. And – there were some deals to be made as well. Most exhibitors we talked to noted that orders had really fallen off since the beginning of October, even more so than usual. Normally orders do fall off just before the market, as people are waiting to see what is available at market. We are very concerned over the credit situation for both retailers and manufacturers and distributors. In the good ole days, when the economy was tough, we could talk to the bankers, who understood the big picture and were willing to work with companies until overall business conditions improved. Unfortu-nately, that is not what we are seeing today. We hope that the government will put pressure on the banks to take some of the money they are putting into the system and push the banks to loosen up. Otherwise, we believe they will force some companies into bankruptcy that really do not need to be there. Back to some good news – gas prices are down and down significantly. Consumers really need that in this economy. At least now when I see that the person before me that bought $10 worth of gas is getting 4 gallons now instead of 2 ½, which was not getting him/her very far. And even more good news, by the time you get this, the election will be almost over (or over). While you may or may not be happy with the winners, at least all the negative campaigning will be over. That has got to help consumer confidence. When you can’t turn on the TV or radio without hearing everything that is wrong with the nation, the economy and anything else you can think of, it has to bring everyone’s confidence down (mine included). We’ve got a lot to fix in the nation before we will see a good deal of improvement in the furniture industry. Most likely, not all will survive. But for those with staying power, we believe that when times do get better, those survivors will do well. We just need to make sure our bankers understand that. ___________________________ This Furniture Insights® newsletter report has been re-published with the permission of Smith Leonard PLLC an independent member of the BDO Seidman Alliance. Firm Profile: Founded in 1930 by BDO Seidman, LLP, the High Point, North Carolina practice was recently acquired by four individuals who have spent the majority of their 100+ year careers building the existing practice. Beginning January 1, 2007, Smith Leonard PLLC became an independent member of the BDO Seidman Alliance. Partners are Ken Smith, Darlene Leonard, Jon Glazman and Mark Bulmer. Among the firm's 32 employees are 18 CPAs. Service Area – Smith Leonard concentrates primarily in the Triad, but also services companies with domestic locations throughout North Carolina, Virginia, South Carolina and Texas. Smith Leonard has an extensive network of international relationships that helps service their clients’ needs throughout the world with locations in Asia, Europe, South America, Mexico and Canada. These companies range in revenue size of $2 million to $300 million. Practice Concentration – The majority of the client base is composed of manufacturing and distribution companies. Many of its clients are either furniture manufacturers, distributors or suppliers to the furniture industry. Smith Leonard also services companies in retail, transportation, insurance, not-for-profit entities and employee benefit plans. Smith Leonard offers a full range of accounting and consulting services including audits, compilations, reviews, tax planning and compliance. The partners and staff of Smith Leonard also assists clients in mergers, acquisitions, business consulting, cash flow projections, and tax outsourcing. Individual clients benefit from extensive experience in family wealth services including estate tax planning. The firm continues to produce monthly and annual statistics for the furniture industry. For more information call (336) 883-018 or e-Mail: ksmith@smithleonardcpas.com.

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