Monthly Furniture Insights Report From Smith Leonard
Furniture Industry News Update -
February 2012 was another good month for the participants of our survey of residential furniture manufacturers and distributors. New orders were 11 percent higher than February 2011 and 17 percent higher than January 2012. February orders are typically considerably higher than January as folks get ready for spring.
February 2011 orders were even with February 2010, but February 2010 reported a 13 percent increase over February 2009, so not a bad month at all.
Year-to-date, new orders are up 12 percent following last month’s 13 percent increase. For the month, some 77 percent of the participants reported increased orders with several reporting well into double digit increases. Year-to-date, some 65 percent of the participants reported increases, about the same as last month.
February marked the 6th consecutive month with double digit increases in orders.
Shipments and Backlogs
After several months of good orders, shipments started to catch up with February shipments up 17 percent over February 2011. February 2011 shipments were down slightly from 2010. A very strong 92 percent of the participants reported increased shipments over February a year ago. It has been a long time since we have seen that high a percentage.
Year-to-date, shipments are now up 13 percent over the first two months of last year. Approximately 78 percent of the participants have reported increased shipments, another recent history high.
With orders, in dollars, exceeding shipments, backlogs increased again – up 6 percent from last month and up 20 percent from last year. With that in mind, we expect that March shipments will be higher when we report next month.
Receivables and Inventories
In spite of the increase in shipments over last year, receivable levels remained unchanged, and increased only 5 percent over January. Receivable levels remain in very good shape over all.
Inventories fell 6 percent from January, as might be expected with the increase in shipments. Inventories were up 1 percent from last year’s levels. As with receivables, inventory levels remain in very good shape from our perspective.
Factory and Warehouse Employees and Payrolls The number of factory and warehouse employees were up 6 percent over last February, up from a 4 percent increase reported last month. The number of employees increased 1 percent over January.
Payrolls were up 13 percent over last February, which appears to mean more people were working more hours. Year-to- date, payrolls were up 12 percent, in line with the increase in orders and sales.
The Conference Board Consumer Confidence Index®, which had declined slightly in March, was virtually unchanged in April. The Index now stands at 69.2 (1985=100), down slightly from 69.5 in March. The Expectations Index declined to 81.1 from 82.5, while the Present Situation Index improved to 51.4 from 49.9 last month.
Lynn Franco, Director of The Conference Board Consumer Research Center said: “Consumer Confidence was virtually unchanged in April, following a modest decline in March. As was the case last month, the slight dip was prompted by
a moderation in consumers’ short-term outlook, while their assessment of current conditions continued to improve. Overall, consumers are more upbeat about the state of the economy, but they remain cautiously optimistic.”
Consumers’ assessment of current conditions improved in April. Those claiming business conditions are “good” increased to 15.3 percent from 14.3 percent. However, those claiming business conditions are “bad” edged up to 33.5 percent from 33.2 percent. Consumers’ appraisal of the job market remained mixed. Those stating jobs are “hard to get” declined to 37.5 percent from 40.7 percent, while those stating jobs are “plentiful” decreased to 8.4 percent from 9.0 percent.
Consumers were, once again, slightly less optimistic about the short-term outlook. Those expecting business conditions to improve over the next six months decreased to 18.8 percent from 19.3 percent, while those anticipating business conditions will worsen increased to 14.2 percent from 13.7 percent.
Leading Economic Indicators
The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.3 percent in March to 95.7 (2004=100), following a 0.7 percent increase in February, and a 0.2 percent increase in January.
Ataman Ozyildirim, economist at The Conference Board said: “The LEI increased for the sixth consecutive month, pointing to a more positive outlook despite subdued consumer expectations and weakness in manufacturing new orders.
Moreover, the six-month growth rate of the LEI continues to improve. The CEI, a measure of current economic conditions, has also increased in five of the last six months, with broad based gains in all components.”
Ken Goldstein, economist at The Conference Board said: “Despite relatively weak data on jobs, home building and output in the past month or two, the indicators signal continued economic momentum. We expect a gradual improvement in growth past the summer months.”
The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.2 percent in March to 104.2 (2004=100), following a 0.2 percent increase in February, and a 0.1 percent increase in January.
The Conference Board Lagging Economic Index® (LAG) increased 0.3 percent in March to 114.4 (2004 = 100), following a 0.1 percent increase in February, and a 0.6 percent increase in January.
Existing-home sales were down in March but continue to outpace year-ago levels, while inventory tightened and home prices are showing further signs of stabilizing, according to the National Association of Realtors® (NAR).
Total existing-home sales, which are completed transactions that include single- family homes, townhomes, condominiums and co-ops, declined 2.6 percent to a seasonally adjusted annual rate of 4.48 million in March from an upwardly revised 4.60 million in February, but are 5.2 percent above the 4.26 million-unit pace in March 2011.
Single-family home sales declined 2.5 percent to a seasonally adjusted annual rate of 3.97 million in March from 4.07 million in February, but are 5.9 percent above the 3.75 million-unit pace a year ago. The median existing single-family home price was $163,600 in March, up 1.9 percent from March 2011. Existing condominium and co- op sales fell 3.8 percent to a seasonally adjusted annual rate of 510,000 in March from 530,000 in February, and are unchanged from March 2011. The median existing condo price was $165,200 in March, which is 7.1 percent above a year ago.
Lawrence Yun, NAR chief economist, said the recovery is in the process of settling into a higher level of home sales. “The recovery is happening though not at a breakout pace, but we have seen nine consecutive months of year-over-year sales increases,” he said. “Existing-home sales are moving up and down in a fairly narrow range that is well above the level of activity during the first half of last year. With job growth, low interest rates, bargain home prices and an improving economy, the pent-up demand is coming to market and we expect housing to be notably better this year.”
Total housing inventory at the end of March declined 1.3 percent to 2.37 million existing homes available for sale, which represents a 6.3-month supply at the current sales pace, the same as in February. Listed inventory is 21.8 percent below a year ago and well below the record of 4.04 million in July 2007.
“We were expecting a seasonal increase in home listings, but a lack of inventory has suddenly become an issue in several markets with not enough homes for sale in relation to buyer interest,” Yun said. “Home sales could be held back because of supply factors and not by demand – we’re already seeing this in the Western states and in South Florida.”
Regionally, existing-home sales in the Northeast declined 1.7 percent to an annual level of 580,000 in March but were 5.5 percent higher than a year ago. The median price in the Northeast was $228,300, down 1.9 percent from March 2011.
Existing-home sales in the Midwest were unchanged in March at a pace of 1.02 million but were 15.9 percent above March 2011. The median price in the Midwest was $132,800, up 5.2 percent from a year ago.
In the South, existing-home sales slipped 1.1 percent to an annual level of 1.75 million in March but were 3.6 percent higher than a year ago. The median price in the South was $146,500, up 6.2 percent from March 2011.
Existing-home sales in the West fell 7.4 percent to an annual pace of 1.13 million in March and were 0.9 percent below March 2011. The median price in the West was $198,300, up 1.6 percent from a year ago.
New Residential Sales
Sales of new single-family houses in March 2012 were at a seasonally adjusted annual rate of 328,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This was 7.1 percent below the revised February rate of 353,000, but was 7.5 percent above the March 2011 estimate of 305,000.
The median sales price of new houses sold in March 2012 was $234,500; the average sales price was $291,200. The seasonally adjusted estimate of new houses for sale at the end of March was 144,000. This represents a supply of 5.3 months at the current sales rate.
Compared to March 2011, new houses sold were up 12.0 percent in the Northeast and 16.4 percent in the South. Sales fell 7.7 percent in the Midwest and 7.1 percent in the West.
According to the U.S. Census Bureau News Joint Release with the U.S. Department of Housing and Urban Development, privately-owned housing starts in March were at a seasonally adjusted annual rate of 654,000. This was 5.8 percent below the revised February figure of 694,000, but was 10.3 percent above the March 2011 rate of 593,000.
Single-family housing starts in March were at a rate of 462,000; this was 0.2 percent below the revised February estimate of 463,000. Single-family housing starts in March were up 18.4 percent in the Northeast; 33.8 percent in the Midwest; 2.6 percent in the South; and 9.6 percent in the West compared to March 2011.
The U.S. Census Bureau announced that advance estimates of U.S. retail and food services sales for March, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $411.1 billion, an increase of 0.8 percent from the previous month and 6.5 percent above March 2011. Total sales for the January through March 2012 period were up 6.4 percent from the same period a year ago.
Retail trade sales were up 0.8 percent from February 2012 and 6.5 percent above last year. Building material and garden equipment and supplies dealers sales were up 14.1 percent from March 2011 and nonstore retailers were up 9.3 percent from last year.
On an adjusted basis, sales at furniture and home furnishings stores were up 1.1 percent from February and up 6.6 percent over March 2011. Year-to-date, sales at these stores were up 10.7 percent.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in March on a seasonally adjusted basis, according to the report from the U.S. Bureau of Labor Statistics. Over the last 12 months, the all items index increased 2.7 percent before seasonal adjustment.
The indexes for food, energy, and all items less food and energy all increased in March. The gasoline index continued to rise, more than offsetting a decline in the household energy index and leading to a 0.9 percent increase in the energy index. The food index rose 0.2 percent as the index for meats, poultry, fish, and eggs increased notably. The index for all items less food and energy rose 0.2 percent in March after increasing 0.1 percent in February. Most of the major components increased in March, with the indexes for shelter and used cars and trucks accounting for about half the total increase for all items less food and energy. The indexes for medical care, apparel, recreation, new vehicles, and airline fares increased as well, while the indexes for tobacco and household furnishings and operations were among the few to decline in March.
Nonfarm payroll employment rose by 120,000 in March, and the unemployment rate was little changed at 8.2 percent, according to the U.S. Bureau of Labor Statistics. Employment rose in manufacturing, food services and drinking places, and health care, but was down in retail trade. The number of unemployed persons (12.7 million) was little changed in March.
Durable Goods Orders and Factory Shipments New orders for manufactured durable goods in March decreased $8.8 billion or 4.2 percent to $202.6 billion, according to the U.S. Census Bureau. This decrease, down two of the last three months, followed a 1.9 percent February increase. Excluding transportation, new orders decreased 1.1 percent. Excluding defense, new orders decreased 4.6 percent.
Transportation equipment, also down two of the last three months, had the largest decrease, $7.1 billion or 12.5 percent to $49.7 billion. This was due to nondefense aircraft and parts, which decreased $7.7 billion.
Shipments of manufactured durable goods in March, up three of the last four months, increased $2.0 billion or 1.0 percent to $208.8 billion. This followed a 0.3 percent February decrease.
Machinery, up four of the last five months, had the largest increase, $2.0 billion or 6.5 percent to $32.9 billion. This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 3.1 percent February increase.
According to this report, orders for furniture and related products in February were up 10 percent over February a year ago and were up 7.7 percent year-to-date. Shipments in February were up 6 percent from February 2011 and were up 5.5 percent year-to-date.
February results of our survey continued the streak of good news. New orders were up 11 percent over last year and 12 percent for the two months. This marked the 6th consecutive month that orders were up double digits. February orders also marked the 11th out of the last 12 months that orders exceeded the prior year comparison. (May of 2012 was flat with May of 2011.)
Shipments also increased very nicely with February shipments up 17 percent over last year and 13 percent year-to-date. Backlogs were also up significantly at 20 percent.
On top of that, inventory and receivable levels were very much in line considering the increase in orders and shipments.
From what we have heard, we expect March results to be favorable as well.
We just finished what we perceived to be a very good High Point Market. Most everyone we talked to said attendance was up and the streets and parking lots and buses seemed to prove that. We also heard that room occupancy at the local hotels was the best in some time with reports of more people finding rooms in our sister cities. More exhibitors also showed at market with several sites at near capacity.
The only negative news we heard was that April at retail had slowed down a bit (or a lot in some cases) but we found plenty of things to blame that on – the early holiday, better weather earlier in the year, spring breaks, etc.
After a very mild winter and beautiful spring, we were not lucky with the weather with a bit of rain and some days with cooler temperatures. In spite of that, we found that the transportation system did an awesome job of moving people around. We even used the Red Line for the first time ever and could not believe how good it was. Every time we needed a bus, there was one in minutes.
While we are not merchandisers, we saw lots of great product here as well. We hope all who attended or showed or sold or whatever had a great market. For those who did not come, you missed a good one.
While we have had a streak of good results, these numbers are just making a good dent in all that was lost since 2007. For the first two months of 2012, orders were down in dollars still some 15 percent from the first two months of 2006 (price increases not considered). But the good news is that we do appear to be recovering.
The consumers also appear to be coming back after this long recession. We do not expect to gain it all back at once, but we are at least seeing some really positive results for an extended period.
Let’s hope the enthusiasm from Market continues.
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