September 2024 Furniture Insights Report From Smith Leonard

Furniture World News Desk on 10/2/2024

MONTHLY RESULTS

New Orders

According to our latest survey of residential furniture manufacturers and distributors, new orders were down 5% in July 2024 compared to July 2023, which follows the 6% year over year decline in June 2024. However, approximately one-half of the participants reported an increase in orders in July 2024 compared to a year ago. New orders were also down 9% compared to the prior month of June 2024. However, year to date through July 2024, new orders are still up 2% compared to 2023, though that spread has continued to narrow with the last three months’ declines.

Shipments and Backlogs

July 2024 shipments were up 6% from July 2023, but down 7% from June 2024. Shipments in July 2024 were up for approximately one-half of the participants compared to July 2023. However, July can be expected to fluctuate due to the timing and duration of the 4th of July holiday in the United States, during which many companies shut down

Year to date through July 2024, shipments are down 7% compared to 2023.

July 2024 backlogs were down 11% compared to July 2023, and down 3% from June 2024.

Receivables and Inventories

Receivable levels were down 3% from June 2024, but flat with July 2023, which is hopefully timing rather than an indication of deteriorating customer credit.

Inventories were consistent with June 2024 and down 11% from July 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 4% from July a year ago and also down 1% from June 2024.

Year to date through July 2024, payroll expense is down 2%, which is consistent with employee headcount and prior periods.

NATIONAL

Consumer Confidence

The Conference Board Consumer Confidence Index® fell in September to 98.7 (1985=100), from an upwardly revised 105.6 in August

The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell by 10.3 points to 124.3.

The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions— declined by 4.6 points to 81.7, but remained above 80. (A reading below the threshold of 80 usually signals a recession ahead.)

“Consumer confidence dropped in September to near the bottom of the narrow range that has prevailed over the past two years,” said Dana M. Peterson, Chief Economist at The Conference Board. “September’s decline was the largest since August 2021 and all five components of the Index deteriorated. Consumers’ assessments of current business conditions turned negative while views of the current labor market situation softened further. Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future income.”

“The drop in confidence was steepest for consumers aged 35 to 54. As a result, on a six-month moving average basis, the 35–54 age group has become the least confident while consumers under 35 remain the most confident. Confidence declined in September across most income groups, with consumers earning less than $50K experiencing the largest decrease. On a six-month moving average basis, consumers earning over $100K remained the most confident.”

Peterson added: “The deterioration across the Index’s main components likely reflected consumers concerns about the labor market and reactions to fewer hours, slower payroll increases, fewer job openings—even if the labor market remains quite healthy, with low unemployment, few layoffs and elevated wages. The proportion of consumers anticipating a recession over the next 12 months remained low but there was a slight uptick in the percentage of consumers believing the economy was already in recession.”

The share of consumers expecting higher interest rates over the next 12 months dropped for the fourth month in a row to 46.5%— the lowest since February 2024. The share expecting lower rates increased to 33.3%, the highest since April 2020. September write- in responses also included more mentions of interest rates as affecting consumer’s views of the US economy.

Despite slower overall inflation and declines in some goods prices, average 12-month inflation expectations increased to 5.2% in September. Nonetheless, this measure remains well below the peak of 7.9% reached in March 2022. Mentions of prices and inflation continued to top write-in responses as topics affecting consumers’ views of the economy, but there was some increase in respondents mentioning lower inflation. Meanwhile, consumers’ expectations for the stock market stabilized after the financial market tumult in early August: 25% of consumers expected stock prices to fall over the year ahead (down from 26.5% in August), while 47.6% expected stock prices to rise (down slightly from 47.9% in August).

While still positive, consumers’ assessments of their Family’s Financial Situation—both current and expected over the next six months—weakened in September compared to August. (These measures are not included in calculating the Consumer Confidence Index®).

Against this backdrop, consumer buying plans for big-ticket appliances were mixed and plans to buy a smartphone or laptop/PC in the next six months eased. However, on a six-month moving average basis, purchasing plans for homes and new cars improved slightly. When asked about plans to buy more goods or services over the next six months, consumers showed a slightly greater preference for purchasing goods.

A new question about services in this month’s survey revealed consumers were still keen to travel and dine out in September. It found that consumers were still willing to stream entertainment at home but that interest in going to the movies rose in recent months. Regarding non-discretionary services like health care and utilities, planned spending over the next 6 months was also strong

In September, write-in responses about politics, including the November elections, remained below both 2020 and 2016 levels.

Present Situation
Consumers’ assessment of current business conditions turned negative in September.

• 18.8% of consumers said business conditions were “good,” down from 21.1% in August.
• 20.2% said business conditions were “bad,” up from 17.3%

Consumers’ appraisals of the labor market deteriorated in September.

• 30.9% of consumers said jobs were “plentiful,” down from 32.7% in August.
• 18.3% of consumers said jobs were “hard to get,” up from 16.8%.

Expectations Six Months Hence
Consumers were less optimistic about the business conditions outlook in September

• 18.5% of consumers expected business conditions to improve, down from 19.1% in August.
• 16.6% expected business conditions to worsen, up from 14.5%.

Consumers’ assessments of the labor market outlook were more pessimistic in September.

• 16.4% of consumers expected more jobs to be available, up slightly from 16.3% in August.
• But 18.3% anticipated fewer jobs, up from 17.0%.

Consumers’ assessments of their income prospects were less optimistic in September.

• 18.0% of consumers expected their incomes to increase, down from 18.6% in August.
• 13.0% expected their incomes to decrease, up from 11.7%.

Assessment of Family Finances and Recession Risk

• Consumers’ assessments of their Family’s Current Financial Situation weakened further.
• Consumers’ assessments of their Family’s Expected Financial Situation going forward were also less optimistic.
• Consumers’ Perceived Likelihood of a US Recession over the Next 12 Months ticked up in September but remained well below the May 2020 peak.

Leading Economic Indicators

The Conference Board Leading Economic Index® (LEI) for the U.S. declined by 0.2% in August 2024 to 100.2 (2016=100), following an unrevised 0.6% decline in July. Over the six-month period between February and August 2024, the LEI fell by 2.3%, a smaller rate of decline than the 2.7% drop over the six-month period between August 2023 and February 2024.

“In August, the US LEI remained on a downward trajectory and posted its sixth consecutive monthly decline,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “The erosion continued to be driven by new orders, which recorded its lowest value since May 2023. A negative interest rate spread, persistently gloomy consumer expectations of future business conditions, and lower stock prices after the early-August financial market tumult also weighed on the Index. Overall, the LEI continued to signal headwinds to economic growth ahead. The Conference Board expects US real GDP growth to lose momentum in the second half of this year as higher prices, elevated interest rates, and mounting debt erode domestic demand. However, in the Fed’s September 2024 Summary of Economic Projections, policymakers suggested 100 basis points of interest rate cuts are likely by the end of this year, which should lower borrowing costs and support stronger economic activity in 2025.”

The Conference Board Coincident Economic Index® (CEI) for the U.S. increased by 0.3% in August 2024 to 112.7 (2016=100), after a downwardly revised 0.1% decline in July. Overall, the CEI grew by 0.8% in the six-month period ending in August 2024, slightly above its 0.6% growth rate over the previous six-month period. 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 components improved in August, with industrial production recovering the most after July’s decline.

The Conference Board Lagging Economic Index® (LAG) for the U.S. was unchanged at 119.5 (2016=100) in August 2024, after a decline of 0.1% in July. The LAG’s six-month growth rate softened further to 0.3% over the six-month period ending in August 2024, after a 1.1% increase over the six- month period from February 2023 to August 2024.

Gross Domestic Product

Real gross domestic product (GDP) increased at an annual rate of 3.0% in the second quarter of 2024, according to the "third" estimate released by the U.S. Bureau of Economic Analysis. In the first quarter, real GDP increased 1.6%.

The increase in real GDP primarily reflected increases in consumer spending, private inventory investment, and nonresidential fixed investment. Imports increased.

Compared to the first quarter, the acceleration in real GDP in the second quarter primarily reflected an upturn in private inventory investment and an acceleration in consumer spending. These movements were partly offset by a downturn in residential fixed investment.

Current-dollar GDP increased 5.6% at an annual rate, or $392.6 billion, in the second quarter to a level of $29.02 trillion, a $9.5 billion larger increase than the previous estimate.

The price index for gross domestic purchases increased 2.4% in the second quarter, the same as the previous estimate. The personal consumption expenditures (PCE) price index increased 2.5%, the same as the previous estimate. Excluding food and energy prices, the PCE price index increased 2.8%, also the same as the previous estimate

HOUSING

Existing-Home Sales

Existing-home sales fell in August, according to the National Association of REALTORS®. Three out of four major U.S. regions posted sales declines while the Midwest registered no change. Year-over-year, sales slipped in three regions but remained stable in the Northeast.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – descended 2.5% from July to a seasonally adjusted annual rate of 3.86 million in August. Year-over- year, sales retracted 4.2% (down from 4.03 million in August 2023).

“Home sales were disappointing again in August, but the recent development of lower mortgage rates coupled with increasing inventory is a powerful combination that will provide the environment for sales to move higher in future months,” said NAR Chief Economist Lawrence Yun. “The home-buying process, from the initial search to getting the house keys, typically takes several months.”

Single-family home sales decreased 2.8% to a seasonally adjusted annual rate of 3.48 million in August, down 3.3% from the previous year. The median existing single-family home price was $422,100 in August, up 2.9% from August 2023.

Existing condominium and co-op sales in August were identical to July at a seasonally adjusted annual rate of 380,000 units, down 11.6% from one year ago (430,000 units). The median existing condo price was $366,500 in August, up 3.5% from the prior year ($354,200).

"The median home price of condominiums is cheaper, yet the condominium market is underperforming compared to the single- family market," Yun added. "Rising maintenance and insurance costs have lessened the appeal for condominiums."

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.2% as of September 12. That’s down from 6.35% one week ago and 7.18% one year ago.

The median existing-home price for all housing types in August was $416,700, up 3.1% from one year ago ($404,200). All four U.S. regions posted price increases.

Total housing inventory registered at the end of August was 1.35 million units, up 0.7% from July and 22.7% from one year ago (1.1 million). Unsold inventory sits at a 4.2-month supply at the current sales pace, up from 4.1 months in July and 3.3 months in August 2023.Total housing inventory registered at the end of August was 1.35 million units, up 0.7% from July and 22.7% from one year ago (1.1 million). Unsold inventory sits at a 4.2-month supply at the current sales pace, up from 4.1 months in July and 3.3 months in August 2023.

“The rise in inventory – and, more technically, the accompanying months’ supply – implies home buyers are in a much-improved position to find the right home and at more favorable prices,” Yun added. “However, in areas where supply remains limited, like many markets in the Northeast, sellers still appear to hold the upper hand.”

According to the monthly REALTORS® Confidence Index, properties typically remained on the market for 26 days in August, up from 24 days in July and 20 days in August 2023.

First-time buyers were responsible for 26% of sales in August – matching the all-time low last seen in November 2021 – and down from 29% in both July 2024 and August 2023. NAR’s 2023 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 August faded 2.0% from July to an annual rate of 480,000, which was identical to August 2023. The median price in the Northeast was $503,200, up 7.7% from last year.

In the Midwest, existing-home sales were unchanged in August at an annual rate of 920,000, down 5.2% from the previous year. The median price in the Midwest was $315,400, up 3.8% from August 2023.

Existing-home sales in the South waned 3.9% from July to an annual rate of 1.73 million in August, down 6.0% from one year before. The median price in the South was $367,000, up 1.6% from one year earlier.

In the West, existing-home sales declined 2.7% in August to an annual rate of 730,000, down 1.4% from a year ago. The median price in the West was $622,500, up 2.2% from August 2023.

New Residential Sales

Sales of new single-family houses in August 2024 were at a seasonally adjusted annual rate of 716,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.7% below the revised July rate of 751,000, but is 9.8% above the August 2023 estimate of 652,000.

The median sales price of new houses sold in August 2024 was $420,600 ($429,800 in July 2024). The average sales price was $492,700 ($514,800 in July 2024).

The seasonally-adjusted estimate of new houses for sale at the end of August was 467,000 (462,000 in July 2024). This represents a supply of 7.8 months at the current sales rate (7.5 in July 2024).

Compared to August 2023 on a seasonally-adjusted basis, sales were up 9.8% overall with sales also up 18.0% in the South and 26.6% in the Midwest, but down (33.3)% in the Northeast and (6.7)% in the West.

Housing Starts

Privately-owned housing starts in August were at a seasonally adjusted annual rate of 1,356,000. This is 9.6% above the revised July estimate of 1,237,000 and is 3.9% above the August 2023 rate of 1,305,000

Single-family housing starts in August were at a rate of 992,000; this is 15.8% above the revised July figure of 857,000.

The August rate for units in buildings with five units or more was 333,000 (363,000 in July)

Single-family starts compared to August 2023, on a seasonally-adjusted basis, were up 5.2% in total as well as up 52.7% in the Northeast, and 10.7% in the West, and 33.3% in the Midwest, while being down (6.3)% in the South.

Housing Completions

Privately-owned housing completions in August were at a seasonally adjusted annual rate of 1,788,000. This is 9.2% above the revised July estimate of 1,637,000 and is 30.2% above the August 2023 rate of 1,373,000.

Single-family housing completions in August were at a rate of 1,029,000; this is 5.6% below the revised July rate of 1,090,000.

The August rate for units in buildings with five units or more was 740,000 (473,000 in July)

Single-family completions compared to August 2023, on a seasonally-adjusted basis, were up 8.4% in total and also up 3.4% in the South, 56.4% in the Northeast, and 21.9% in the West, while being down (3.8)% in the Midwest.

OTHER NATIONAL

Retail Sales

Advance estimates of U.S. retail and food services sales for August 2024, adjusted for seasonal variation and holiday and trading- day differences, but not for price changes, were $710.8 billion, an increase of 0.1% from the previous month, and up 2.1% from August 2023. Total sales for the June 2024 through August 2024 period were up 2.3% from the same period a year ago. The June 2024 to July 2024 percent change was revised from up 1.0% to up 1.1%.

Retail trade sales were up 0.1% from July 2024, and up 2.0% from last year. Nonstore retailers were up 7.8% from last year, while food services and drinking places were up 2.7% from August 2023.

Sales at furniture and home furnishings stores were down (0.7)% in August 2024 from July 2024 on a seasonally-adjusted basis, and down the same (0.7)% from August 2023. Sales were also down (5.1)% for YTD August 2024 compared to the same period for 2023 on an unadjusted basis.

Consumer Prices

The Consumer Price Index for All Urban Consumers increased 0.2% on a seasonally adjusted basis, the same increase as in July, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all items index increased 2.5% before seasonal adjustment.

The index for shelter rose 0.5% in August and was the main factor in the all-items increase. The food index increased 0.1% in August, after rising 0.2% in July. The index for food away from home rose 0.3% over the month, while the index for food at home was unchanged. The energy index fell 0.8% over the month, after being unchanged the preceding month.

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

The all-items index rose 2.5% for the 12 months ending August, the smallest 12-month increase since February 2021. The all items less food and energy index rose 3.2% over the last 12 months. The energy index decreased 4.0% for the 12 months ending August. The food index increased 2.1% over the last year.

Employment

Total nonfarm payroll employment increased by 142,000 in August, and the unemployment rate changed little at 4.2%, the U.S. Bureau of Labor Statistics reported. Job gains occurred in construction and health care.

Both the unemployment rate, at 4.2%, and the number of unemployed people, at 7.1 million, changed little in August. These measures are higher than a year earlier, when the jobless rate was 3.8%, and the number of unemployed people was 6.3 million.

Durable Goods Orders and Factory Shipments

New orders for manufactured durable goods in August, up six of the last seven months, increased $0.1 billion or virtually unchanged to $289.7 billion, the U.S. Census Bureau announced. This followed a 9.9% July increase. Excluding transportation, new orders increased 0.5%. Excluding defense, new orders decreased 0.2%. Electrical equipment, appliances, and components, up two of the last three months, drove the increase, $0.3 billion or 1.9% to $14.4 billion.

Shipments of manufactured durable goods in August, down following two consecutive monthly increases, decreased $1.6 billion or 0.5% to $289.4 billion. This followed a 1.1% July increase. Transportation equipment, also down following two consecutive monthly increases, drove the decrease, $1.9 billion or 1.9% to $97.1 billion.

On a seasonally-adjusted basis, shipments for furniture and related products were down (0.7)% compared to the prior month, while new orders were up 0.2%. On a non-adjusted basis, year to date shipments for furniture and related products were up 0.6% compared to the prior year, while year to date new orders were up 1.6%.

Executive Summary

New orders were down 5% in July 2024 compared to July 2023, which follows the 6% year over year decline in June 2024. New orders were also down 9% compared to the prior month of June 2024. However, year to date through July 2024, new orders are still up 2% compared to 2023, though that spread has continued to narrow with the last three months’ declines.

July 2024 shipments were up 6% from July 2023, but down 7% from June 2024. Year to date through July 2024, shipments are down 7% compared to 2023. July 2024 backlogs were down 11% compared to July 2023, and down 3% from June 2024.

Receivable levels were down 3% from June 2024, but flat with July 2023. Inventories and employee/payroll 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® fell in September to 98.7 (1985=100), from an upwardly revised 105.6 in August.

The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell by 10.3 points to 124.3.

The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—declined by 4.6 points to 81.7, but remained above 80. (A reading below the threshold of 80 usually signals a recession ahead.)

“Consumer confidence dropped in September to near the bottom of the narrow range that has prevailed over the past two years,” said Dana M. Peterson, Chief Economist at The Conference Board. “September’s decline was the largest since August 2021 and all five components of the Index deteriorated. Consumers’ assessments of current business conditions turned negative while views of the current labor market situation softened further. Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future income.”

Against this backdrop, consumer buying plans for big-ticket appliances were mixed and plans to buy a smartphone or laptop/PC in the next six months eased. However, on a six-month moving average basis, purchasing plans for homes and new cars improved slightly. When asked about plans to buy more goods or services over the next six months, consumers showed a slightly greater preference for purchasing goods.

Housing

Existing-home sales fell in August, according to the National Association of REALTORS®. Three out of four major U.S. regions posted sales declines while the Midwest registered no change. Year-over-year, sales slipped in three regions but remained stable in the Northeast.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – descended 2.5% from July to a seasonally adjusted annual rate of 3.86 million in August. Year-over-year, sales retracted 4.2% (down from 4.03 million in August 2023).

Single-family home sales decreased 2.8% to a seasonally adjusted annual rate of 3.48 million in August, down 3.3% from the previous year. The median existing single-family home price was $422,100 in August, up 2.9% from August 2023. Existing condominium and co-op sales in August were identical to July at a seasonally adjusted annual rate of 380,000 units, down 11.6% from one year ago (430,000 units). The median existing condo price was $366,500 in August, up 3.5% from the prior year ($354,200).

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.2% as of September 12. That’s down from 6.35% one week ago and 7.18% one year ago.

Sales of new single-family houses in August 2024 were at a seasonally adjusted annual rate of 716,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.7% below the revised July rate of 751,000, but is 9.8% above the August 2023 estimate of 652,000.

Compared to August 2023 on a seasonally-adjusted basis, sales were up 9.8% overall with sales also up 18.0% in the South and 26.6% in the Midwest, but down (33.3)% in the Northeast and (6.7)% in the West.

Other

Real gross domestic product (GDP) increased at an annual rate of 3.0% in the second quarter of 2024, according to the “third” estimate released by the U.S. Bureau of Economic Analysis. In the first quarter, real GDP increased 1.6%.

The increase in real GDP primarily reflected increases in consumer spending, private inventory investment, and nonresidential fixed investment. Imports increased.

Compared to the first quarter, the acceleration in real GDP in the second quarter primarily reflected an upturn in private inventory investment and an acceleration in consumer spending. These movements were partly offset by a downturn in residential fixed investment.

Sales at furniture and home furnishings stores were down (0.7)% in August 2024 from July 2024 on a seasonally-adjusted basis, and down the same (0.7)% from August 2023. Sales were also down (5.1)% for YTD August 2024 compared to the same period for 2023 on an unadjusted basis.

Thoughts

Our hearts go out to our many friends and associates that have been negatively affected by Hurricane Helene this last week. The human toll is obviously heartbreaking. And while it’s impossible to fully grasp the current or long-term impact this will have for the overall industry for an area that is so essential to the production and distribution of product nationwide, we know those within the industry are never short on resilience.

Consumer confidence really took a real beating in September and there wasn’t much to get excited about from the other national economic indicators in August/September either.

However, the long-awaited interest rate cut finally arrived in September in the form of a half point reduction, with the potential for another quarter or half point in November, now that inflation has eased, and the labor market is not as tight in the Fed’s view. Unfortunately, the expected positive impact to housing and ultimately the home furnishings industry will not happen overnight.

Meanwhile, ocean container rates continue to decline in September compared to summer peaks per the World Container Index, though as of this morning, there is now a port strike along the East Coast and Gulf of Mexico to contend with.

And lastly, on a positive note, it’s almost time for the Fall Furniture Market here in High Point and we look forward to seeing many of you in town later this month.

 

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.