June 2024 Furniture Insights Report From Smith Leonard

Furniture World News Desk on 7/4/2024

MONTHLY RESULTS

New Orders

According to our latest survey of residential furniture manufacturers and distributors, new orders were up 22% in April 2024 compared to April 2023 (which was down 19% from April 2022), continuing our streak of 10 out of the last 11 months with overall order growth over the prior year. While the elevated percentage would appear to be a bit of an outlier compared to recent months, approximately 75% of the participants reported increased orders in April 2024 compared to a year ago. However, new orders were once again flat compared to the prior month of March 2024. Year to date through April 2024, new orders are up 8% compared to 2023.

Shipments and Backlogs

Shipments appear to have begun normalizing compared to last year, with April 2024 up 2% from April 2023, but down (1)% from March 2024. Shipments in April 2024 were up for approximately half of the participants compared to April 2023.

Year to date through April 2024, shipments are down (9)% compared to 2023. Presumably that trend will begin to turnaround in the coming months with the increased new order volumes.

April 2024 backlogs were down (12)% compared to April 2023, but up 2% from March 2024.

Receivables and Inventories

Receivable levels were consistent with March 2024, but down (3)% from April 2023, which is materially in line with shipments for the same periods.

Inventories were also consistent with March 2024, but down (20)% from April 2023, which is in line with prior periods and current operational levels.

Factory and Warehouse Employees and Payroll

The number of factory and warehouse employees was down (6)% from April a year ago, and down slightly from March 2024 with a reduction of (2)%. Year to date through April 2024, payroll expense is down (5)% from 2023, which is consistent with the employee headcount.

NATIONAL

Consumer Confidence

The Conference Board Consumer Confidence Index® dipped in June to 100.4 (1985=100), down from 101.3 in May.

The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased to 141.5 (1985=100) from 140.8 last month.

However, the Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—fell to 73.0 (1985=100) in June, down from 74.9 in May. The Expectations Index has been below 80 (the threshold which usually signals a recession ahead) for five consecutive months.

“Confidence pulled back in June but remained within the same narrow range that’s held throughout the past two years, as strength in current labor market views continued to outweigh concerns about the future. However, if material weaknesses in the labor market appear, Confidence could weaken as the year progresses,” said Dana M. Peterson, Chief Economist at The Conference Board.

“Consumers expressed mixed feelings this month: their view of the present situation improved slightly overall, driven by an uptick in sentiment about the current labor market, but their assessment of current business conditions cooled. Meanwhile, for the second month in a row, consumers were a bit less pessimistic about future labor market conditions. However, their expectations for both future income and business conditions weakened, weighing down the overall Expectations Index."

"The decline in confidence between May and June was centered on consumers aged 35-54. By contrast, those under 35 and those 55 and older saw confidence improve this month. No clear pattern emerged in terms of income groups. On a six-month moving average basis, confidence continued to be highest among the youngest (under 35) and wealthiest (making over $100K) consumers.”

Peterson added: “Compared to May, consumers were less concerned about a forthcoming recession. However, consumers’ assessment of their Family’s Financial Situation—both currently and over the next six months—was less positive.” (These measures are not included in calculating the Consumer Confidence Index®).

Average 12-month inflation expectations ticked down slightly from 5.4% to 5.3%. June’s write-in responses revealed that elevated prices, especially for food and groceries, continued to impact consumers’ views of the economy, followed by the labor market and US political situation. Notably, the share of respondents believing the 2024 election would impact the economy was low in comparison to write-ins in June of 2016 and slightly higher than in 2020.

Consumers were positive about the stock market, with 48.4% expecting stock prices to increase over the year ahead, compared to 23.5% expecting a decrease and 28.1% expecting no change. Meanwhile, the share of consumers expecting higher interest rates over the next twelve months dropped to 52.6%, its lowest level since February.

On a six-month moving average basis, purchasing plans for homes were largely unchanged and remained historically low in June. Buying plans for cars also stalled. Meanwhile, buying plans for most big-ticket appliances and smartphones increased slightly, though fewer consumers planned to buy a laptop or a PC.

The share of consumers planning a vacation over the next six months continued to increase and remains above last June’s level. More consumers planned to vacation in the US than abroad. As in recent years, more people plan to travel by car than by plane. Overall, the share of consumers planning to go on vacation is still about 10 percentage points lower than pre-pandemic.

Present Situation
Consumers’ assessment of current business conditions was, on balance, slightly less positive in June.

• 19.6% of consumers said business conditions were “good,” down from 20.8% in May.
• But 17.7% said business conditions were “bad,” also down from 18.4% last month.

Consumers’ appraisal of the labor market improved in June.

• 38.1% of consumers said jobs were “plentiful,” up from 37.0% in May.
• 14.1% of consumers said jobs were “hard to get,” down from 14.3%.

Expectations Six Months Hence
Consumers were less optimistic about the short-term business conditions outlook in June.

• 12.5% of consumers expected business conditions to improve, down from 13.7% in May.
• 16.7% expected business conditions to worsen, down from 16.9%.

Consumers’ assessment of the short-term labor market outlook was a tad less negative in June.

• 12.6% of consumers expected more jobs to be available, down from 13.1% in May.
• 17.3% anticipated fewer jobs, down from 18.8% last month.

Consumers’ assessment of their short-term income prospects deteriorated in June.

• 15.2% of consumers expected their incomes to increase, down from 17.7% in May.
• 11.7% expected their incomes to decrease, up from 11.5%.

Assessment of Family Finances and Recession Risk

• Consumers’ assessment of their Family’s Current Financial Situation weakened in June.
• Consumers’ assessment of their Family’s Financial Situation going forward was virtually unchanged.
• Consumers’ Perceived Likelihood of a US Recession over the Next 12 Months pulled back in June, after rising in both May and April.

Leading Economic Indicators

he Conference Board Leading Economic Index® (LEI) for the U.S. decreased by 0.5% in May 2024 to 101.2 (2016=100), following a 0.6% decline in April. Over the six-month period between November 2023 and May 2024, the LEI fell by 2.0%—a smaller decrease than its 3.4% contraction over the previous six months.

“The U.S. LEI fell again in May, driven primarily by a decline in new orders, weak consumer sentiment about future business conditions, and lower building permits,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “While the Index’s six-month growth rate remained firmly negative, the LEI doesn’t currently signal a recession. We project real GDP growth will slow further to under 1% (annualized) over Q2 and Q3 2024, as elevated inflation and high interest rates continue to weigh on consumer spending.”

The Conference Board Coincident Economic Index® (CEI) for the U.S. rose by 0.4% in May 2024 to 112.4 (2016=100), after increasing by 0.1% in April. The CEI grew 0.6% over the six- month period ending May 2024, down from its 1.0% increase over the previous six months. The CEI’s component indicators—payroll employment, personal income less transfer payments, manufacturing and trade sales, and industrial production—are included among the data used to determine recessions in the US. All four components of the index improved last month, with industrial production making the largest positive contribution to the Index.

The Conference Board Lagging Economic Index® (LAG) for the U.S. inched down by 0.1% in May 2024 to 119.4 (2016=100), after increasing by 0.3% in April. As a result, the LAG’s six-month growth rate softened to 0.7% between November 2023 and May 2024, down from 0.8% over the previous six months.

Gross Domestic Product

Real gross domestic product (GDP) increased at an annual rate of 1.4% in the first quarter of 2024, according to the "third" estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2023, real GDP increased 3.4%.

The GDP estimate is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 1.3%. The upward revision primarily reflected a downward revision to imports, which are a subtraction in the calculation of GDP, and upward revisions to nonresidential fixed investment and government spending. These revisions were partly offset by a downward revision to consumer spending.

The increase in real GDP primarily reflected increases in consumer spending, residential fixed investment, nonresidential fixed investment, and state and local government spending that were partly offset by a decrease in private inventory investment. Imports increased.

Compared to the fourth quarter, the deceleration in real GDP primarily reflected decelerations in consumer spending, exports, and state and local government spending, and a downturn in federal government spending. These movements were partly offset by an acceleration in residential fixed investment. Imports accelerated.

The price index for gross domestic purchases increased 3.1% in the first quarter, an upward revision of 0.1 percentage point from the previous estimate. The personal consumption expenditures (PCE) price index increased 3.4%, an upward revision of 0.1 percentage point. Excluding food and energy prices, the PCE price index increased 3.7%, an upward revision of 0.1 percentage point.

HOUSING

Existing-Home Sales

Existing-home sales slightly declined in May as the median sales price climbed to a record high, according to the National Association of REALTORS®. In the four major U.S. regions, sales slid month-over-month in the South but were unchanged in the Northeast, Midwest and West. Year-over-year, sales rose in the Midwest but receded in the Northeast, South and West.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – retreated 0.7% from April to a seasonally adjusted annual rate of 4.11 million in May. Year-over- year, sales waned 2.8% (down from 4.23 million in May 2023).

Single-family home sales declined to a seasonally adjusted annual rate of 3.71 million in May, down 0.8% from 3.74 million in April and 2.1% from the prior year. The median existing single-family home price was $424,500 in May, up 5.7% from May 2023.

At a seasonally adjusted annual rate of 400,000 units in May, existing condominium and co-op sales were unchanged from last month and down 9.1% from one year ago (440,000 units). The median existing condo price was $371,300 in May, up 5.1% from the previous year ($353,300).

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.87% as of June 20. That's down from 6.95% the prior week but up from 6.67% one year ago.

Total housing inventory registered at the end of May was 1.28 million units, up 6.7% from April and 18.5% from one year ago (1.08 million). Unsold inventory sits at a 3.7-month supply at the current sales pace, up from 3.5 months in April and 3.1 months in May 2023.

The median existing-home price for all housing types in May was $419,300, the highest price ever recorded and an increase of 5.8% from one year ago ($396,500). All four U.S. regions registered price gains.

"Home prices reaching new highs are creating a wider divide between those owning properties and those who wish to be first-time buyers," Yun added. "The mortgage payment for a typical home today is more than double that of homes purchased before 2020. Still, first-time buyers in the market understand the long-term benefits of owning."

According to the monthly REALTORS® Confidence Index, properties typically remained on the market for 24 days in May, down from 26 days in April but up from 18 days in May 2023.

First-time buyers were responsible for 31% of sales in May, down from 33% in April but up from 28% in May 2023. NAR's 202 Profile of Home Buyers and Sellers – released in November 2023 – found that the annual share of first-time buyers was 32%.

Regional

Existing-home sales in the Northeast in May were identical to April at an annual rate of 480,000, a decline of 4% from May 2023. The median price in the Northeast was $479,200, up 9.2% from the prior year.

In the Midwest, existing-home sales were unchanged from one month ago at an annual rate of 1 million in May, up 1% from one year ago. The median price in the Midwest was $317,100, up 6.4% from May 2023.

Existing-home sales in the South fell 1.6% from April to an annual rate of 1.87 million in May, down 5.1% from the previous year. The median price in the South was $374,300, up 3.6% from last year.

In the West, existing-home sales in May were equivalent to April at an annual rate of 760,000, a drop of 1.3% from one year before. The median price in the West was $632,900, up 5.5% from May 2023.

New Residential Sales

Sales of new single‐family houses in May 2024 were at a seasonally adjusted annual rate of 619,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.3% below the revised April rate of 698,000 and is 16.5% below the May 2023 estimate of 741,000.

The median sales price of new houses sold in May 2024 was $417,400 ($433,500 in April 2024). The average sales price was $520,000 ($505,700 in April 2024).

The seasonally‐adjusted estimate of new houses for sale at the end of May was 481,000 (480,000 in April 2024). This represents a supply of 9.3 months at the current sales rate (9.1 months in April 2024).

Compared to May 2023 on a seasonally-adjusted basis, sales were down (16.5)% overall with sales up 13.3% in the Midwest, down (17.7)% in the South, (20.9)% in the West, and (43.8)% in the Northeast.

Housing Starts

Privately‐owned housing starts in May were at a seasonally adjusted annual rate of 1,277,000. This is 5.5% below the revised April estimate of 1,352,000 and is 19.3% below the May 2023 rate of 1,583,000.

Single‐family housing starts in May were at a rate of 982,000; this is 5.2% below the revised April figure of 1,036,000.

The May rate for units in buildings with five units or more was 278,000 (322,000 in April).

Single-family starts compared to May 2023, on a seasonally-adjusted basis, were down (1.7)% in total and also down (3.5)% in the South, (19.4)% in the Midwest, (3.3)% in the Northeast, while being up 16.9% in the West.

Housing Completions

Privately‐owned housing completions in May were at a seasonally adjusted annual rate of 1,514,000. This is 8.4% below the revised April estimate of 1,652,000, but is 1.0% above the May 2023 rate of 1,499,000.

Single‐family housing completions in May were at a rate of 1,027,000; this is 8.5% below the revised April rate of 1,122,000.

The May rate for units in buildings with five units or more was 479,000 (516,000 in April).

Single-family completions compared to May 2023, on a seasonally-adjusted basis, were up 2.0% in total and also up 6.8% in the South, while being down (2.2)% in the West, (7.4)% in the Midwest and (6.0)% in the Northeast.

OTHER NATIONAL

Retail Sales

Advance estimates of U.S. retail and food services sales for May 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $703.1 billion, up 0.1% from the previous month, and up 2.3% above May 2023. Total sales for the March 2024 through May 2024 period were up 2.9% from the same period a year ago. The March 2024 to April 2024 percent change was revised from virtually unchanged to down 0.2%.

Retail trade sales were up 0.2% from April 2024, and up 2.0% above last year. Nonstore retailers were up 6.8% from last year, while food services and drinking places were up 3.8% from May 2023.

Sales at furniture and home furnishings stores were down 0.1% in May 2024 from April 2024 on a seasonally-adjusted basis, and down 6.8% from May 2023.

Consumer Prices

The Consumer Price Index for All Urban Consumers was unchanged in May on a seasonally adjusted basis, after rising 0.3% in April, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all-items index increased 3.3% before seasonal adjustment.

More than offsetting a decline in gasoline, the index for shelter rose in May, up 0.4% for the fourth consecutive month. The index for food increased 0.1% in May. The food away from home index rose 0.4% over the month, while the food at home index was unchanged. The energy index fell 2.0% over the month, led by a 3.6% decrease in the gasoline index.

The index for all-items less food and energy rose 0.2% in May, after rising 0.3% the preceding month. Indexes which increased in May include shelter, medical care, used cars and trucks, and education. The indexes for airline fares, new vehicles, communication, recreation, and apparel were among those that decreased over the month.

The all-items index rose 3.3% for the 12 months ending May, a smaller increase than the 3.4% increase for the 12 months ending April. The all-items less food and energy index rose 3.4% over the last 12 months. The energy index increased 3.7% for the 12 months ending May. The food index increased 2.1% over the last year.

Employment

Total nonfarm payroll employment increased by 272,000 in May, and the unemployment rate changed little at 4.0%, the U.S. Bureau of Labor Statistics reported. Employment continued to trend up in several industries, led by health care; government; leisure and hospitality; and professional, scientific, and technical services.

Both the unemployment rate, at 4.0%, and the number of unemployed people, at 6.6 million, changed little in May. A year earlier, the jobless rate was 3.7%, and the number of unemployed people was 6.1 million.

 

Durable Goods Orders and Factory Shipments

New orders for manufactured durable goods in May, up four consecutive months, increased $0.3 billion or 0.1% to $283.1 billion, the U.S. Census Bureau announced. This followed a 0.2% April increase. Excluding transportation, new orders decreased 0.1%. Excluding defense, new orders decreased 0.2%. Transportation equipment, up three of the last four months, drove the increase, $0.5 billion or 0.6% to $95.4 billion.

Shipments of manufactured durable goods in May, down following three consecutive monthly increases, decreased $1.0 billion or 0.3% to $284.7 billion. This followed a 1.2% April increase. Transportation equipment, also down following three consecutive monthly increases, led the decrease, $0.8 billion or 0.8% to $92.0 billion.

On a seasonally-adjusted basis, shipments for furniture and related products were down (0.4)% compared to the prior month, while new orders were down (1.2)%. On a non-adjusted basis, year to date shipments for furniture and related products were up 0.3% compared to the prior year, while new orders were up 0.2%.

Executive Summary

New orders were up 22% in April 2024 compared to April 2023 (which was down 19% from April 2022), continuing our streak of 10 out of the last 11 months with overall order growth over the prior year. While the elevated percentage would appear to be a bit of an outlier compared to recent months, year to date through April 2024, new orders are up 8% compared to 2023. However, new orders were flat compared to the prior month of March 2024.

Shipments appear to have begun normalizing compared to last year, with April 2024 up 2% from April 2023, but down (1)% from March 2024. Year to date through April 2024, shipments are down (9)% compared to 2023.

April 2024 backlogs were down (12)% compared to April 2023, but up 2% from March 2024.

Receivable levels were consistent with March 2024, but down (3)% from April 2023, which is materially in line with shipments for the same periods.

Inventories and employee levels are again materially in line with recent months, but down from 2023, indicating that companies have aligned levels to match current operations.

National

Consumer Confidence

The Conference Board Consumer Confidence Index® dipped in June to 100.4 (1985=100), down from 101.3 in May.

The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased to 141.5 (1985=100) from 140.8 last month.

However, the Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—fell to 73.0 (1985=100) in June, down from 74.9 in May. The Expectations Index has been below 80 (the threshold which usually signals a recession ahead) for five consecutive months.

“Confidence pulled back in June but remained within the same narrow range that’s held throughout the past two years, as strength in current labor market views continued to outweigh concerns about the future. However, if material weaknesses in the labor market appear, Confidence could weaken as the year progresses,” said Dana M. Peterson, Chief Economist at The Conference Board.

Peterson added: “Compared to May, consumers were less concerned about a forthcoming recession. However, consumers’ assessment of their Family’s Financial Situation—both currently and over the next six months—was less positive.”

On a six-month moving average basis, purchasing plans for homes were largely unchanged and remained historically low in June. Buying plans for cars also stalled. Meanwhile, buying plans for most big-ticket appliances and smartphones increased slightly, though fewer consumers planned to buy a laptop or a PC.

Housing

Existing-home sales slightly declined in May as the median sales price climbed to a record high, according to the National Association of REALTORS®. In the four major U.S. regions, sales slid month-over-month in the South but were unchanged in the Northeast, Midwest and West. Year-over-year, sales rose in the Midwest but receded in the Northeast, South and West.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – retreated 0.7% from April to a seasonally adjusted annual rate of 4.11 million in May. Year-over-year, sales waned 2.8% (down from 4.23 million in May 2023).

Single-family home sales declined to a seasonally adjusted annual rate of 3.71 million in May, down 0.8% from 3.74 million in April and 2.1% from the prior year. The median existing single-family home price was $424,500 in May, up 5.7% from May 2023.

At a seasonally adjusted annual rate of 400,000 units in May, existing condominium and co-op sales were unchanged from last month and down 9.1% from one year ago (440,000 units). The median existing condo price was $371,300 in May, up 5.1% from the previous year ($353,300).

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.87% as of June 20. That’s down from 6.95% the prior week but up from 6.67% one year ago.

Sales of new single‐family houses in May 2024 were at a seasonally adjusted annual rate of 619,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.3% below the revised April rate of 698,000 and is 16.5% below the May 2023 estimate of 741,000.

Compared to May 2023 on a seasonally-adjusted basis, sales were down (16.5)% overall with sales up 13.3% in the Midwest, down (17.7)% in the South, (20.9)% in the West, and (43.8)% in the Northeast.

Other

Real gross domestic product (GDP) increased at an annual rate of 1.4% in the first quarter of 2024, according to the “third” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2023, real GDP increased 3.4%.

The increase in real GDP primarily reflected increases in consumer spending, residential fixed investment, nonresidential fixed investment, and state and local government spending that were partly offset by a decrease in private inventory investment. Imports increased.

Compared to the fourth quarter, the deceleration in real GDP primarily reflected decelerations in consumer spending, exports, and state and local government spending, and a downturn in federal government spending. These movements were partly offset by an acceleration in residential fixed investment. Imports accelerated.

Sales at furniture and home furnishings stores were down 0.1% in May 2024 from April 2024 on a seasonally-adjusted basis, and down 6.8% from May 2023.

Thoughts

Overall, there were minimal changes in the economic indicators we track during April/May 2024 compared to recent months. However, our monthly stats and national data shows the furniture industry continuing to hold its own in the face of headwinds from consumer confidence, housing, interest rates, and inflation.

Meanwhile, ocean container rates are again on the rise with TD Cowen reporting a 94% increase in spot rates between March 28 and June 27, though this is expected to ease in the second half of the year. This has led some within the industry to reestablish surcharges on internationally sourced goods.

On a more positive note, in their June 2024 meeting, the Fed indicated the possibility for one 0.25% cut by the end of the year, with the potential for up to four additional 0.25% cuts in 2025 if inflation continues to ease.

Hopefully, the increased new orders we’ve seen in our monthly stats for the first four months of 2024 will drive strong shipments through the remainder of the summer into the fall, when help could be on the way in the form of initial interest rate cuts, increased housing activity, lower container rates, and improvements in consumer confidence as life returns to “normal” post-election cycle.

Hope our friends here in the States enjoy their July 4th holidays.

 

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.