February 2025 Furniture Insights Report From Smith Leonard

Furniture World News Desk on 3/4/2025

MONTHLY RESULTS

New Orders

According to our latest survey of residential furniture manufacturers and distributors, new orders were up 1% in December 2024 compared to December 2023. Approximately two-thirds of participants reported increases versus decreases in December 2024 compared to a year ago. Year to date through December 2024, new orders are now down 1% compared to 2023. New orders were also down 15% compared to the prior month of November 2024, which seems to include some seasonality due to the December holiday break (was down 22% month over month last year).

Shipments and Backlogs

December 2024 shipments were down 2% from December 2023, and also down 7% with November 2024. Shipments in December 2024 were down for approximately half of the participants compared to December 2023.

Year to date through December 2024, shipments were down 6% compared to 2023.

December 2024 backlogs were down 8% compared to November 2023, and also down 2% from November 2024 as current shipments outpaced new orders during the last month.

Receivables and Inventories

Receivable levels were down 7% from November 2024, and down 3% from December 2023, both of which are materially in line with the respective shipment trends, given normal timing differences with collections.

Inventories were consistent with November 2024 and down 2% from December 2023, which are in line with prior periods and current operational levels.

Factory and Warehouse Employees and Payroll

The number of factory and warehouse employees remained down 5% from December a year ago, but again even with the prior month.

Payroll expense was down 10% in December 2024 compared to November 2024, presumably due to holiday break (was down 11% last year). Year to date through December 2024, payroll expense is again down 3%, which is materially consistent with the employee headcount and prior periods.

NATIONAL

Consumer Confidence

The Conference Board Consumer Confidence Index® declined by 7.0 points in February to 98.3 (1985=100).

The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell 3.4 points to 136.5.

The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions— dropped 9.3 points to 72.9.

For the first time since June 2024, the Expectations Index was below the threshold of 80 that usually signals a recession ahead. The cutoff date for preliminary results was February 19, 2025.

“In February, consumer confidence registered the largest monthly decline since August 2021,” said Stephanie Guichard, Senior Economist, Global Indicators at The Conference Board. “This is the third consecutive month on month decline, bringing the Index to the bottom of the range that has prevailed since 2022. Of the five components of the Index, only consumers’ assessment of present business conditions improved, albeit slightly. Views of current labor market conditions weakened. Consumers became pessimistic about future business conditions and less optimistic about future income. Pessimism about future employment prospects worsened and reached a ten-month high.”

February’s fall in confidence was shared across all age groups but was deepest for consumers between 35 and 55 years old. The decline was also broad-based among income groups, with the only exceptions among households earning less than $15,000 a year and between $100,000–125,000.

Guichard added: “Average 12-month inflation expectations surged from 5.2% to 6% in February. This increase likely reflected a mix of factors, including sticky inflation but also the recent jump in prices of key household staples like eggs and the expected impact of tariffs. References to inflation and prices in general continue to rank high in write-in responses, but the focus shifted towards other topics. There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019. Most notably, comments on the current Administration and its policies dominated the responses.”

Consumers’ views of their Family’s Current and Future Financial Situation were less positive, retreating from the series highs reached in January. The proportion of consumers anticipating a recession over the next 12 months increased to a nine-month high. (These measures are not included in calculating the Consumer Confidence Index®.) Consumers’ bullishness about the stock market also retreated: only 46.8% of consumers expected stock prices to increase over the year ahead—the smallest share since April 2024, and down from 54.2% in January. By contrast, 32.8% expected stock prices to decline, up from 24.8% in January. More than half (51.7%) of consumers expected higher interest rates over the next 12 months. The share of consumers expecting lower interest rates dropped further to 24.0% from 27.1% last month.

On a six-month moving average basis, purchasing plans for homes continued to recover, likely supported by the very recent decline in mortgage rates. On the other hand, buying plans for cars and big-ticket items were down, with notable declines for TVs and electronics. Consumers’ overall intentions to purchase additional services in the months ahead were changed little, but their priorities shifted slightly: personal and health care, as well as movies and live entertainment, moved up the priority list, at the expense of streaming and travel. Vacation plans continued to trend downward.

Present Situation
Consumers’ assessments of current business conditions improved slightly in February.

• 19.6% of consumers said business conditions were “good,” up from 18.5% in January.
• 15.7% said business conditions were “bad,” up from 15.2%.

Consumers’ views of the labor market were less positive in February.

• 33.4% of consumers said jobs were “plentiful,” down from 33.9% in January.
• 16.3% of consumers said jobs were “hard to get,” up from 14.5%.

Expectations Six Months Hence

Consumers’ outlook for business conditions turned negative in February.

• 20.2% of consumers expected business conditions to improve, down from 20.8% in January.
• 26.7% expected business conditions to worsen, up from 19.6%.

Consumers’ pessimism about the labor market outlook worsened.

• 18.4% of consumers expected more jobs to be available, down from 19.1% in January.
• 25.9% anticipated fewer jobs, up from 21.0% in January.

Consumers were less optimistic about their income prospects in February.

• 18.2% of consumers expected their incomes to increase, a slight uptick from 18.1% in January.
• But 13.7% expected their incomes to decrease, up from 12.3%.

Assessment of Family Finances and Recession Risk

• Consumers’ assessments of their Family’s Current Financial Situation became less positive in February.
• Consumers’ assessments of their Family’s Expected Financial Situation also weakened.
• Consumers’ Perceived Likelihood of a US Recession over the Next 12 Months rose in February.

Leading Economic Indicators

The Conference Board Leading Economic Index® (LEI) for the US fell by 0.3% in January 2025 to 101.5 (2016=100), after a 0.1% increase in December 2024 (upwardly revised from an initially estimated decline of 0.1%). Overall, the LEI recorded a 0.9% decline in the six-month period ending January 2025, much less than its 1.7% decline over the previous six months.

“The US LEI declined in January, reversing most of the gains from the previous two months,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “Consumers’ assessments of future business conditions turned more pessimistic in January, which—alongside fewer weekly hours worked in manufacturing—drove the monthly decline. However, manufacturing orders have almost stabilized after weighing heavily on the Index since 2022, and the yield spread contributed positively for the first time since November 2022. Overall, just four of the LEI’s 10 components were negative in January. In addition, the LEI’s six-month and annual growth rates continued to trend upward, signaling milder obstacles to US economic activity ahead. We currently forecast that real GDP for the US will expand by 2.3% in 2025, with stronger growth in the first half of the year.”

The Conference Board Coincident Economic Index® (CEI) for the US rose by 0.3% in January 2025 to 114.3 (2016=100), after also increasing 0.3% in December 2024. As a result, the CEI rose by 1.0% over the six-month period between July 2024 and January 2025, close to its 0.9% growth over the previous six months. The CEI’s four 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. They all improved in January, with the largest positive contribution coming from industrial production for the second consecutive month. This was followed by personal income less transfer payments, manufacturing and trade sales, and payroll employment.

The Conference Board Lagging Economic Index® (LAG) for the US increased by 0.5% to 119.3 (2016=100) in January 2025, after no change in December 2024. As a result, the LAG’s six-month change turned positive to 0.3% growth for the first time since the summer of 2024.

Gross Domestic Product

Real gross domestic product (GDP) increased at an annual rate of 2.3% in the fourth quarter of 2024 (October, November, and December), according to the second estimate released by the U.S. Bureau of Economic Analysis. In the third quarter, real GDP increased 3.1%.

The increase in real GDP in the fourth quarter primarily reflected increases in consumer spending and government spending that were partly offset by a decrease in investment. Imports, which are a subtraction in the calculation of GDP, decreased.

Real GDP was revised up by less than 0.1 percentage point from the advance estimate released last month, primarily reflecting upward revisions to government spending and exports that were partly offset by downward revisions to consumer spending and investment.

Real GDP increased 2.8% in 2024 (from the 2023 annual level to the 2024 annual level), the same as previously estimated. The increase in real GDP in 2024 reflected increases in consumer spending, investment, government spending, and exports. Imports increased.

The price index for gross domestic purchases increased 2.4% in 2024, revised up 0.1 percentage point. The 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 retreated in January, according to the National Association of REALTORS®. Sales slipped in three major U.S. regions and held steady in the Midwest. Year-over-year, sales rose in three regions and were unchanged in the South.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – descended 4.9% from December to a seasonally adjusted annual rate of 4.08 million in January. Year-over-year, sales improved 2.0% (up from 4 million in January 2024).

"Mortgage rates have refused to budge for several months despite multiple rounds of short-term interest rate cuts by the Federal Reserve," said NAR Chief Economist Lawrence Yun. "When combined with elevated home prices, housing affordability remains a major challenge."

"More housing supply allows strongly qualified buyers to enter the market," Yun added. "But for many consumers, both increased inventory and lower mortgage rates are necessary for them to purchase a different home or become first-time homeowners."

Single-family home sales declined 5.2% to a seasonally adjusted annual rate of 3.68 million in January, up 2.2% from the previous year. The median existing single-family home price was $402,000 in January, up 5.0% from January 2024.

Existing condominium and co-op sales faded 2.4% in January to a seasonally adjusted annual rate of 400,000 units, identical to one year ago. The median existing condo price was $349,500 in January, up 2.9% from the prior year ($339,500).

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.85% as of February 20. That's down from 6.87% one week ago and 6.90% one year ago.

Total housing inventory registered at the end of January was 1.18 million units, up 3.5% from December and 16.8% from one year ago (1.01 million). Unsold inventory sits at a 3.5-month supply at the current sales pace, up from 3.2 months in December and 3.0 months in January 2024.

The median existing-home price for all housing types in January was $396,900, up 4.8% from one year ago ($378,600). All four U.S. regions registered price increases.

According to the monthly REALTORS® Confidence Index, properties typically remained on the market for 41 days in January, up from 35 days in December and 36 days in January 2024.

First-time buyers were responsible for 28% of sales in January, down from 31% in December 2024 and identical to January 2024. NAR's 2024 Profile of Home Buyers and Sellers – released November 2024 – found that the annual share of first-time buyers was 24%, the lowest ever recorded.

Regional

In January, existing-home sales in the Northeast waned 5.7% from December to an annual rate of 500,000, up 4.2% from January 2024. The median price in the Northeast was $475,400, up 9.5% from one year earlier.

In the Midwest, existing-home sales were unchanged in January at an annual rate of 1 million, up 5.3% from the previous year. The median price in the Midwest was $290,400, up 7.2% from January 2024.

Existing-home sales in the South fell 6.2% from December to an annual rate of 1.83 million in January, identical to one year before. The median price in the South was $356,300, up 3.5% from last year.

In the West, existing-home sales slumped 7.4% in January to an annual rate of 750,000, up 1.4% from a year ago. The median price in the West was $614,200, up 7.4% from January 2024.

New Residential Sales

Sales of new single-family houses in January 2025 were at a seasonally adjusted annual rate of 657,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 10.5% below the revised December rate of 734,000 and is 1.1% below the January 2024 estimate of 664,000.

The median sales price of new houses sold in January 2025 was $446,300 ($427,000 in December 2024). The average sales price was $510,000 ($514,000 in December 2024).

The seasonally-adjusted estimate of new houses for sale at the end of January was 495,000 (494,000 in December). This represents a supply of 9.0 months at the current sales rate (8.5 months in December 2024).

Compared to January 2024 on a seasonally-adjusted basis, sales were down 1.1% overall with sales also down 48.1% in the Northeast, down 13.6% in the Midwest, but up 6.8% in the South and up 3.1% in the West.

Housing Starts

Privately-owned housing starts in January were at a seasonally adjusted annual rate of 1,366,000. This is 9.8% below the revised December estimate of 1,515,000 and is 0.7% below the January 2024 rate of 1,376,000.

Single-family housing starts in January were at a rate of 993,000; this is 8.4% below the revised December figure of 1,084,000.

The January rate for units in buildings with five units or more was 355,000 (418,000 in December 2024).

Single-family starts compared to January 2024, on a seasonally-adjusted basis, were down 1.8% in total, as well as down 10.0% in the South and down 23.2 in the Northeast, but up 12.0% in the West and up 23.2% in the Midwest.

Housing Completions

Privately-owned housing completions in January were at a seasonally adjusted annual rate of 1,651,000. This is 7.6% above the revised December estimate of 1,534,000 and is 9.8% above the January 2024 rate of 1,504,000

Single-family housing completions in January were at a rate of 982,000; this is 7.1% above the revised December rate of 917,000.

The January rate for units in buildings with five units or more was 652,000 (570,000 in December 2024).

Single-family completions compared to January 2024, on a seasonally-adjusted basis, were up 8.9% in total and also up 10.8% in the Midwest, 33.7% in the West, and 28.3% in the Northeast, but down 2.0% in the South.

OTHER NATIONAL

Retail Sales

Advance estimates of U.S. retail and food services sales for January 2025, adjusted for seasonal variation and holiday and trading- day differences, but not for price changes, were $723.9 billion, down 0.9% from the previous month, and up 4.2% from January 2024. Total sales for the November 2024 through January 2025 period were up 4.2% from the same period a year ago. The November 2024 to December 2024 percent change was revised from up 0.4% to up 0.7%.

Retail trade sales were down 1.2% from December 2024, and up 4.0% from last year. Motor vehicle and parts dealers were up 6.4% from last year, while food service and drinking places were up 5.4% from January 2024.

Sales at furniture and home furnishings stores were down 1.7% in January 2025 from December 2024 on a seasonally-adjusted basis, but up 3.7% from January 2024.

Consumer Prices

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5% on a seasonally adjusted basis in January, after rising 0.4% in December, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all-items index increased 3.0% before seasonal adjustment.

The index for shelter rose 0.4% in January, accounting for nearly 30% of the monthly all-items increase. The energy index rose 1.1% over the month, as the gasoline index increased 1.8%. The index for food also increased in January, rising 0.4% as the index for food at home rose 0.5% and the index for food away from home increased 0.2%.

The index for all-items less food and energy rose 0.4% in January. Indexes that increased over the month include motor vehicle insurance, recreation, used cars and trucks, medical care, communication, and airline fares. The indexes for apparel, personal care, and household furnishings and operations were among the few major indexes that decreased in January.

The all-items index rose 3.0% for the 12 months ending January, after rising 2.9% over the 12 months ending December. The all- items less food and energy index rose 3.3% over the last 12 months. The energy index increased 1.0% for the 12 months ending January. The food index increased 2.5% over the last year.

Employment

Total nonfarm payroll employment rose by 143,000 in January, and the unemployment rate edged down to 4.0%, the U.S. Bureau of Labor Statistics reported. Job gains occurred in health care, retail trade, and social assistance. Employment declined in the mining, quarrying, and oil and gas extraction industry.

The unemployment rate edged down to 4.0% in January, after accounting for the annual adjustments to the population controls. The number of unemployed people, at 6.8 million, changed little over the month.

Durable Goods Orders and Factory Shipments

New orders for manufactured durable goods in December, down four of the last five months, decreased $6.2 billion or 2.2% to $276.1 billion, unchanged from the previously published decrease. This followed a 2.0% November decrease. Transportation equipment, also down four of the last five months, drove the decrease, $6.9 billion or 7.4% to $86.1 billion. New orders for manufactured nondurable goods increased $1.0 billion or 0.3% to $302.4 billion.

Shipments of manufactured durable goods in December, up following four consecutive monthly decreases, increased $2.7 billion or 0.9% to $287.3 billion, unchanged from the previously published increase.

This followed a 0.3% November decrease. Transportation equipment, also up following four consecutive monthly decreases, led the increase, $2.6 billion or 2.8% to $93.3 billion. Shipments of manufactured nondurable goods, up three consecutive months, increased $1.0 billion or 0.3% to $302.4 billion. This followed a 0.4% November increase. Petroleum and coal products, also up three consecutive months, led the increase, $0.5 billion or 0.7% to $63.1 billion.

On a seasonally-adjusted basis, shipments for furniture and related products were down 0.9% compared to the prior month, while new orders were also down 0.5%. On a non-adjusted basis, year to date shipments for furniture and related products were up 0.7% compared to the prior year, while year to date new orders were up 1.3%.

Executive Summary

New orders were up 1% in December 2024 compared to December 2023. Year to date through December 2024, new orders were again down 1% compared to 2023. New orders were down 15% compared to the prior month of November 2024, which seems to include some seasonality due to the December holiday break (was down 22% month over month last year).

December 2024 shipments were down 2% from December 2023, and down 7% from November 2024. Year to date through December 2024, shipments were down 6% from 2023.

December 2024 backlogs were down 8% compared to December 2023, and down 2% from November 2024.

Receivable levels were up 1% from October 2024, but down 4% from November 2023, both of which are materially in line with the respective shipment trends.

Inventories and employee/payroll levels are again materially in line with recent months (though December payroll was down from November due to holidays), but down from 2023, indicating that companies have aligned levels to match current operations.

National

Consumer Confidence

The Conference Board Consumer Confidence Index® declined by 7.0 points in February to 98.3 (1985=100)

The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell 3.4 points to 136.5.

The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—dropped 9.3 points to 72.9.

For the first time since June 2024, the Expectations Index was below the threshold of 80 that usually signals a recession ahead. The cutoff date for preliminary results was February 19, 2025. “In February, consumer confidence registered the largest monthly decline since August 2021,” said Stephanie Guichard, Senior Economist, Global Indicators at The Conference Board. “This is the third consecutive month on month decline, bringing the Index to the bottom of the range that has prevailed since 2022. Of the five components of the Index, only consumers’ assessment of present business conditions improved, albeit slightly. Views of current labor market conditions weakened. Consumers became pessimistic about future business conditions and less optimistic about future income. Pessimism about future employment prospects worsened and reached a ten-month high.”

On a six-month moving average basis, purchasing plans for homes continued to recover, likely supported by the very recent decline in mortgage rates. On the other hand, buying plans for cars and big-ticket items were down, with notable declines for TVs and electronics. Consumers’ overall intentions to purchase additional services in the months ahead were changed little, but their priorities shifted slightly: personal and health care, as well as movies and live entertainment, moved up the priority list, at the expense of streaming and travel. Vacation plans continued to trend downward.

Housing

Existing-home sales retreated in January, according to the National Association of REALTORS®. Sales slipped in three major U.S. regions and held steady in the Midwest. Year-over-year, sales rose in three regions and were unchanged in the South.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – descended 4.9% from December to a seasonally adjusted annual rate of 4.08 million in January. Year-over-year, sales improved 2.0% (up from 4 million in January 2024).

Single-family home sales declined 5.2% to a seasonally adjusted annual rate of 3.68 million in January, up 2.2% from the previous year. The median existing single-family home price was $402,000 in January, up 5.0% from January 2024.

Existing condominium and co-op sales faded 2.4% in January to a seasonally adjusted annual rate of 400,000 units, identical to one year ago. The median existing condo price was $349,500 in January, up 2.9% from the prior year ($339,500).

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.85% as of February 20. That’s down from 6.87% one week ago and 6.90% one year ago.

Sales of new single-family houses in January 2025 were at a seasonally adjusted annual rate of 657,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 10.5% below the revised December rate of 734,000 and is 1.1% below the January 2024 estimate of 664,000.

Compared to January 2024 on a seasonally-adjusted basis, sales were down 1.1% overall with sales also down 48.1% in the Northeast, down 13.6% in the Midwest, but up 6.8% in the South and up 3.1% in the West.

Other

Real gross domestic product (GDP) increased at an annual rate of 2.3% in the fourth quarter of 2024 (October, November, and December), according to the advance estimate released by the U.S. Bureau of Economic Analysis. In the third quarter, real GDP increased 3.1%. The increase in real GDP primarily reflected increases in consumer spending, exports, nonresidential fixed investment, and federal government spending. Imports increased.

Real GDP increased 2.8% in 2024 (from the 2023 annual level to the 2024 annual level), compared with an increase of 2.9% in 2023. The increase in real GDP in 2024 reflected increases in consumer spending, investment, government spending, and exports. Imports increased.

Sales at furniture and home furnishings stores were up 2.3% in December 2024 from November 2024 on a seasonally-adjusted basis, and up 8.4% from December 2023. However, sales were still down 2.2% for year to date December 2024 compared to the same period for 2023 on an unadjusted basis (were down 3.3% YTD November 2024).

Thoughts

Tariffs certainly dominated the news and conversations last month, and as of press time, we again find ourselves waiting on Tuesday’s announcement to hear exactly what level of tariffs will ultimately go into effect for Canada, Mexico, and China, with the looming threat of potentially others being added in the future.

While the housing data was mixed, consumer confidence really took a hit this month, so it will be interesting to see whether this is the start of an enduring trend or hopefully just a temporary blip that will reverse itself once much the current uncertainty is resolved.

And the furniture industry does seem to be gaining a little momentum based upon recent industry reports, year-over-year retail data, as well as our own survey’s modest increase in new orders this month. However, it remains to be seen the extent these economic policies will have on the 2025 outlook for the industry and beyond.

 

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.

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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.