furniture

February 2024 Furniture Insights Report From Smith Leonard



Furniture World News Desk on

3/6/2024


MONTHLY RESULTS

 

New Orders


According to our latest survey of residential furniture manufacturers and
distributors, new orders rose 6% in December 2023 compared to December 2022
marking the 8th straight month orders have grown over the prior year, though
cooling off from the double-digit percentage growth we saw in the previous
seven months. Approximately two-thirds of the participants reported increased
orders in December 2023 compared to a year ago. For calendar 2023, new orders
were up 5% over 2022, though 2022 year-to-date orders were down (31)% from
2021.

Shipments and Backlogs


Shipments in December 2023 were down (4)% from November 2023 and down (14)%
from December 2022, which were up 3% from December 2021. Shipments in December
2023 were down for approximately two-thirds of the participants compared to
December 2022. For calendar 2023, shipments were down (17)% from 2022. So
despite recent improvements in new orders, trends continue to be affected by
many companies shipping from their historically high backlogs through much of
2022. And with month-over-month orders declining, December 2023 backlogs were
down (5)% from November 2023 and down (33)% compared to December 2022.

Receivables and Inventories


Receivable levels were down (12)% from November, which seems to be a
normalization from the 5% increase spike we saw in the prior month. Receivable
levels were down (16)% from December 2022, which is materially in line with
the year-to-date decline in shipments.


Inventories were down slightly from November 2023 and were down (28)% from
December 2022, again indicating that most companies have rebalanced their
inventory levels to match current operations.

Factory and Warehouse Employees and Payroll


The number of factory and warehouse employees was down (7)% from December a
year ago and materially flat with November 2023, again indicating most
companies have right-sized their teams, though most are still eager to add
good people when available.

NATIONAL

Consumer Confidence


The Conference Board Consumer Confidence Index® fell in February to 106.7
(1985=100), down from a revised 110.9 in January. February’s decline in the
Index occurred after three consecutive months of gains. However, as January
was revised downward from the preliminary reading of 114.8, the data now
suggest that there was not a material breakout to the upside in confidence at
the start of 2024


The Present Situation Index—based on consumers’ assessment of current business
and labor market conditions—fell back to 147.2 (1985=100) in February from
154.9 in January. The Expectations Index—based on consumers’ short-term
outlook for income, business, and labor market conditions—slipped to 79.8
(1985=100), down from a revised 81.5 in January. An Expectations Index reading
below 80 often signals recession ahead.


“The decline in consumer confidence in February interrupted a three- month
rise, reflecting persistent uncertainty about the US economy,” said Dana
Peterson, Chief Economist at The Conference Board. “The drop in confidence was
broad-based, affecting all income groups except households earning less than
$15,000 and those earning more than $125,000. Confidence deteriorated for
consumers under the age of 35 and those 55 and over, whereas it improved
slightly for those aged 35 to 54.”


Peterson added: “February’s write-in responses revealed that while overall
inflation remained the main preoccupation of consumers, they are now a bit
less concerned about food and gas prices, which have eased in recent months.
But they are more concerned about the labor market situation and the US
political environment.”


Assessments of the present situation weakened in February, as consumers’ views
of both business conditions and the employment situation became less
favorable. Furthermore, consumers’ assessments of their personal financial
situation (a measure not included in calculating the Present Situation Index)
also weakened.


Consumer expectations for the next six months deteriorated in February, driven
by renewed pessimism regarding future business and labor market conditions.
Consumers were also a bit less optimistic about their family financial
situation over the next six months (a measure not included in calculating the
Expectations Index). Additionally, consumers’ Perceived Likelihood of a US
Recession over the Next 12 Months picked back up after falling over the
previous three months.


On a six-month basis, buying plans for autos, homes, and big-ticket appliances
dipped slightly. The share of consumers planning a vacation over the next six
months also declined. Expectations that interest rates will rise over the year
ahead picked up slightly to 42.7%, which may have influenced buying plans.
Meanwhile, consumers remained upbeat about stock prices over the year ahead.


Average 12-month inflation expectations ticked down further to 5.2% in
February. After peaking at 7.9% in mid-2022, expected inflation has now fallen
to its lowest level since March 2020, when it stood at 4.5%. This aligns with
continued slowing in consumer price inflation in government reports and fewer
complaints about food and energy prices in our survey.

Present Situation
Consumers’ assessment of current business conditions fell slightly in February.


  • 21.2% of consumers said business conditions were “good,” down slightly from
    21.3% in January.
  • 17.1% said business conditions were “bad,” up from 15.3%


Consumers’ appraisal of the labor market was also less positive in February.


  • 41.3% of consumers said jobs were “plentiful,” down from 42.7% in January
  • 13.5% of consumers said jobs were “hard to get,” up from 11.0%


Expectations Six Months Hence

Consumers were, on balance, more pessimistic about the short-term business
conditions outlook in February.


  • 14.8% of consumers expect business conditions to improve, down from 16.7% in
    January.
  • 15.5% expect business conditions to worsen, down from 16.0%


Consumers’ assessment of the short-term labor market outlook was more
pessimistic in February.


  • 14.7% of consumers expect more jobs to be available, down from 15.6% in
    January.
  • 17.3% anticipate fewer jobs, up from 16.7%.


Consumers’ assessment of their short-term income prospects was, on balance,
more optimistic in February.


  • 16.9% of consumers expect their incomes to increase, down from 17.1% in
    January.
  • 11.3% expect their incomes to decrease, down from 12.5%.

Assessment of Family Finances and Recession Risk


  • Consumers’ assessment of their Family’s Current Financial Situation was less
    positive in February.

  • Consumers were a bit less optimistic about their Family’s Financial
    Situation going forward.

  • Consumers’ Perceived Likelihood of a US Recession over the Next 12 Months
    ticked up in February.

Leading Economic Indicators


The Conference Board Leading Economic Index® (LEI) for the U.S. fell by 0.4%
in January 2024 to 102.7 (2016=100), following a 0.2% decline in December
2023. The LEI contracted by 3.0% over the six-month period between July 2023
and January 2024, a smaller decrease than the 4.1% decline over the previous
six months.


“The U.S. LEI fell further in January, as weekly hours worked in manufacturing
continued to decline and the yield spread remained negative,” said Justyna
Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The
Conference Board. “While the declining LEI continues to signal headwinds to
economic activity, for the first time in the past two years, six out of its
ten components were positive contributors over the past six-month period
(ending in January 2024). As a result, the leading index currently does not
signal recession ahead. While no longer forecasting a recession in 2024, we do
expect real GDP growth to slow to near zero percent over Q2 and Q3.”


The Conference Board Coincident Economic Index® (CEI) for the U.S. rose by
0.2% in January 2024 to 112.1 (2016=100), after a 0.2% increase in December
2023. The CEI expanded by 1.0% in the six-month period ending January 2024,
down from a 0.8% growth rate 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. Three out of four components
of the index were positive in January, with payroll employment and personal
income less transfer payments having the strongest contributions, followed by
a much smaller positive contribution from manufacturing and trade sales.


The Conference Board Lagging Economic Index® (LAG) for the U.S. rose by 0.4%
in January 2024 to 118.6 (2016 = 100), reversing a decline of 0.4% in December
2023. The LAG is up by 0.9% over the six-month period from July to January
2024, following a decline of 0.1% over the previous six months.

Gross Domestic Product


Real gross domestic product (GDP) increased at an annual rate of 3.2% in the
fourth quarter of 2023, according to the “second” estimate released by the
Bureau of Economic Analysis. In the third quarter, real GDP increased 4.9%.


The GDP “second” estimate is based on more complete source data than were
available for the “advance” estimate issued last month. In the advance
estimate, the increase in real GDP was 3.3%. The update primarily reflected a
downward revision to private inventory investment that was partly offset by
upward revisions to state and local government spending and consumer spendin


The increase in real GDP reflected increases in consumer spending, exports,
state and local government spending, nonresidential fixed investment, federal
government spending, and residential fixed investment that were partly offset
by a decrease in private inventory investment. Imports, which are a
subtraction in the calculation of GDP, increased.


Compared to the third quarter of 2023, the deceleration in real GDP in the
fourth quarter primarily reflected a downturn in private inventory investment
and slowdowns in federal government spending, residential fixed investment,
and consumer spending. Imports decelerated.


Real GDP increased 2.5% in 2023 (from the 2022 annual level to the 2023 annual
level), compared with an increase of 1.9% in 2022. The increase in real GDP in
2023 primarily reflected increases in consumer spending, nonresidential fixed
investment, state and local government spending, exports, and federal
government spending that were partly offset by decreases in residential fixed
investment and private inventory investment. Imports decreased.

HOUSING

Existing-Home Sales


Existing-home sales retreated in January, according to the National
Association of REALTORS®. Among the four major U.S. regions, sales accelerated
in the Midwest, South and West, and remained steady in the Northeast.
Year-over-year, sales improved in the West, and decreased in the Northeast,
Midwest and South.


Total existing-home sales – completed transactions that include single-family
homes, townhomes, condominiums and co-ops – elevated 3.1% from December to a
seasonally adjusted annual rate of 4.00 million in January. Year-over-year,
sales slipped 1.7% (down from 4.07 million in January 2023).


Single-family home sales moved higher to a seasonally adjusted annual rate of
3.6 million in January, up 3.4% from 3.48 million in December but down 1.4%
from the prior year. The median existing single-family home price was $383,500
in January, up 5.0% from January 2023.


Single-family home sales moved higher to a seasonally adjusted annual rate of
3.6 million in January, up 3.4% from 3.48 million in December but down 1.4%
from the prior year. The median existing single-family home price was $383,500
in January, up 5.0% from January 2023.


At a seasonally adjusted annual rate of 400,000 units in January, existing
condominium and co-op sales were unchanged from last month and down 4.8% from
one year ago (420,000 units). The median existing condo price was $339,400 in
January, up 5.7% from the previous year ($321,100).


“While home sales remain sizably lower than a couple of years ago, January’s
monthly gain is the start of more supply and demand,” said NAR Chief Economist
Lawrence Yun. “Listings were modestly higher, and home buyers are taking
advantage of lower mortgage rates compared to late last year.”


According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.77% as of
February 15 th. That’s up from 6.64% the previous week and 6.32% one year ago.


Total housing inventory registered at the end of January was 1.01 million
units, up 2.0% from December and 3.1% from one year ago (980,000). Unsold
inventory sits at a 3.0-month supply at the current sales pace, down from 3.1
months in December but up from 2.9 months in January 2023.


The median existing-home price for all housing types in January was $379,100,
an increase of 5.1% from one year ago ($360,800). All four U.S. regions posted
price increases.


“The median home price reached an all-time high for the month of January,” Yun
added. “Multiple offers are common on mid-priced homes, and many homes were
still sold within a month. The elevated share of cash deals – 32% – indicated
a market full of multiple offers and propelled by record-high housing wealth.”


“Despite sluggish home sales, 85 million homeowning households enjoyed further
gains in housing wealth,” Yun added. “Obviously, the recent, rapid three-year
rise in home prices is unsustainable. If price increases continue at the
current pace, the country could accelerate into haves and have-nots. Creating
a path towards homeownership for today’s renters is essential. It requires
economic and income growth and, most importantly, a steady buildup of home
construction.”


First-time buyers were responsible for 28% of sales in January, down from 29%
in December and 31% in January 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


At 480,000 units, existing-home sales in the Northeast were unchanged from
December but down 5.9% from January 2023. The median price in the Northeast
was $434,300, up 10.1% from the prior year.


In the Midwest, existing-home sales increased 2.2% from one month ago to an
annual rate of 950,000 in January, down 3.1% from last year. The median price
in the Midwest was $271,700, up 7.6% from January 2023.


Existing-home sales in the South rose 4.0% from December to an annual rate of
1.84 million in January, a decline of 1.6% from the previous year. The median
price in the South was $345,100, up 4.1% from one year ago.


In the West, existing-home sales elevated 4.3% from a month ago to an annual
rate of 730,000 in January and grew 2.8% from one year earlier. The median
price in the West was $572,100, up 6.3% from January 2023.

New Residential Sales


Sales of new single‐family houses in January 2024 were at a seasonally
adjusted annual rate of 661,000, according to estimates released jointly by
the U.S. Census Bureau and the Department of Housing and Urban Development.
This is 1.5% above the revised December rate of 651,000 and is 1.8% above the
January 2023 estimate of 649,000.


The median sales price of new houses sold in January 2024 was $420,700. The
average sales price was $534,300.


The median sales price of new houses sold in December 2023 was $413,200. The
average sales price was $487,300.


The seasonally‐adjusted estimate of new houses for sale at the end of January
was 456,000. This represents a supply of 8.3 months at the current sales rate.


Compared to January 2023 on a seasonally-adjusted basis, sales were up 1.5%
overall with sales up 72.0% in the Northeast, 7.7% in the Midwest, 38.7% in
the West, and down (15.6)% in the South.

Housing Starts


Privately‐owned housing starts in January were at a seasonally adjusted annual
rate of 1,331,000. This is 14.8% below the revised December estimate of
1,562,000 and is 0.7% below the January 2023 rate of 1,340,000.


Single‐family housing starts in January were at a rate of 1,004,000; this is
4.7% below the revised December figure of 1,054,000.


Single-family starts compared to January 2023 were up 22.0% in total and also
up 8.4% in the South, 17.3% in the Midwest, 80.0% in the West and 24.6% in the
Northeast.

January rate for units in buildings with five units or more was 314,000.

Housing Completions


Privately‐owned housing completions in January were at a seasonally adjusted
annual rate of 1,416,000. This is 8.1% below the revised December estimate of
1,541,000, but is 2.8% above the January 2023 rate of 1,377,000.


Single‐family housing completions in January were at a rate of 857,000; this
is 16.3% below the revised December rate of 1,024,000.


Single-family completions compared to January 2023 were down (15.8)% in total
and also down (8.7)% in the South, (24.6)% in the Midwest, (25.2)% in the
West, and (28.3)% in the Northeast.


The January rate for units in buildings with five units or more was 538,000.

OTHER NATIONAL

Retail Sales


Advance estimates of U.S. retail and food services sales for January 2024,
adjusted for seasonal variation and holiday and trading- day differences, but
not for price changes, were $700.3 billion, down 0.8% from the previous month,
and up 0.6% above January 2023. Total sales for the November 2023 through
January 2024 period were up 3.1% from the same period a year ago.


Retail trade sales were down 1.1% from December 2023, and down 0.2% below last
year. Nonstore retailers were up 6.4% from last year, while food services and
drinking places were up 6.3% from January 2023.


Sales at furniture and home furnishings stores were up 1.4% in January 2024
from December 2023 on a seasonally-adjusted basis, but down 9.8% from January
2023.

Consumer Prices


The Consumer Price Index for All Urban Consumers increased 0.3% in January on
a seasonally adjusted basis, after rising 0.2% in December, the U.S. Bureau of
Labor Statistics reported. Over the last 12 months, the all-items index
increased 3.1% before seasonal adjustment.


The index for shelter continued to rise in January, increasing 0.6% and
contributing over two thirds of the monthly all items increase. The food index
increased 0.4% in January, as the food at home index increased 0.4% and the
food away from home index rose 0.5% over the month. In contrast, the energy
index fell 0.9% over the month due in large part to the decline in the
gasoline index.


The index for all items less food and energy rose 0.4% in January. Indexes
which increased in January include shelter, motor vehicle insurance, and
medical care. The index for used cars and trucks and the index for apparel
were among those that decreased over the month.


The all-items index rose 3.1% for the 12 months ending January, a smaller
increase than the 3.4% increase for the 12 months ending December. The
all-items less food and energy index rose 3.9% over the last 12 months, the
same increase as for the 12 months ending December. The energy index decreased
4.6% for the 12 months ending January, while the food index increased 2.6%
over the last year.

Employment


Total nonfarm payroll employment rose by 353,000 in January, and the
unemployment rate remained at 3.7%, the U.S. Bureau of Labor Statistics
reported. Job gains occurred in professional and business services, health
care, retail trade, and social assistance. Employment declined in the mining,
quarrying, and oil and gas extraction industry.


In January, the unemployment rate was 3.7% for the third month in a row, and
the number of unemployed people was little changed at 6.1 million.

 

Durable Goods Orders and Factory Shipments


New orders for manufactured durable goods in December, down two of the last
three months, decreased less than $0.1 billion or virtually unchanged to
$295.4 billion, down from the previously published virtually unchanged
increase. This followed a 5.4% November increase. Transportation equipment,
also down two of the last three months, drove the decrease, $1.0 billion or
0.9% to $106.8 billion. New orders for manufactured nondurable goods increased
$1.2 billion or 0.4% to $298.9 billion


Shipments of manufactured durable goods in December, down three of the last
four months, decreased $0.9 billion or 0.3% to $282.1 billion, unchanged from
the previously published decrease. This followed a 1.0% November increase.
Transportation equipment, also down three of the last four months, led the
decrease, $0.7 billion or 0.8% to $89.6 billion. Shipments of manufactured
nondurable goods, up following two consecutive monthly decreases, increased
$1.2 billion or 0.4% to $298.9 billion. This followed a virtually unchanged
November decrease. Food products, up five of the last six months, led the
increase, $0.4 billion or 0.5% to $80.3 billion.

Executive Summary


New orders rose 6% in December 2023 compared to December 2022, which marks the
8th straight month orders have grown over the prior year, but a cooling off
from the double-digit percentages we’ve been seeing. For calendar 2023, new
orders were up 5% over 2022, which were down (33)% from 2021.


Shipments in December 2023 were down (4)% from November 2023 and down (14)%
from December 2022, which were up 3% from December 2021. For calendar 2023,
shipments were down (17)% from 2022. So despite recent improvements in new
orders, trends continue to be affected by many companies shipping from their
historically high backlogs through much of 2022. Accordingly, December 2023
backlogs were down (5)% from November 2023 and down (33)% compared to December
2022.


Receivable levels were down (12)% from November 2023, reversing the apparent
5% timing difference increase from the prior month. Receivable levels were
down (16)% from December 2022, which is materially in line with the
year-to-date decline in shipments.


Inventories and employee levels are again in line with prior months, but down
from December 2022, indicating that companies have substantially adjusted
levels to match current operations.

National

Consumer Confidence


The Conference Board Consumer Confidence Index® fell in February to 106.7,
down from a revised 110.9 in January. February’s decline in the Index occurred
after three consecutive months of gains.


The Present Situation Index—based on consumers’ assessment of current business
and labor market conditions—fell back to 147.2 in February from 154.9 in
January.


The Expectations Index—based on consumers’ short-term outlook for income,
business, and labor market conditions—slipped to 79.8, down from a revised
81.5 in January. An Expectations Index reading below 80 often signals
recession ahead.


On a six-month basis, buying plans for autos, homes, and big-ticket appliances
dipped slightly. The share of consumers planning a vacation over the next six
months also declined. Expectations that interest rates will rise over the year
ahead picked up slightly to 42.7%, which may have influenced buying plans.
Meanwhile, consumers remained upbeat about stock prices over the year ahead.

Housing


Existing-home sales grew in January, according to the National Association of
REALTORS®. Among the four major U.S. regions, sales accelerated in the
Midwest, South, and West, and remained steady in the Northeast.
Year-over-year, sales improved in the West, and decreased in the Northeast,
Midwest, and South.


Total existing-home sales elevated 3.1% from December to a seasonally adjusted
annual rate of 4.00 million in January. Year-over-year, sales slipped 1.7%
(down from 4.07 million in January 2023).


Single-family home sales moved higher to a seasonally adjusted annual rate of
3.6 million in January, up 3.4% from 3.48 million in December but down 1.4%
from the prior year. The median existing single-family home price was $383,500
in January, up 5.0% from January 2023.


At a seasonally adjusted annual rate of 400,000 units in January, existing
condominium and co-op sales were unchanged from last month and down 4.8% from
one year ago (420,000 units). The median existing condo price was $339,400 in
January, up 5.7% from the previous year ($321,100).


According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.77% as of
February 15. That’s up from 6.64% the previous week and 6.32% one year ago.


Sales of new single‐family houses in January 2024 were at a seasonally
adjusted annual rate of 661,000, according to estimates released jointly by
the U.S. Census Bureau and the Department of Housing and Urban Development.
This is 1.5% above the revised December rate of 651,000 and is 1.8% above the
January 2023 estimate of 649,000.


Compared to January 2023 on a seasonally adjusted basis, sales were up 1.5%
overall with sales up 72.0% in the Northeast, 7.7% in the Midwest, 38.7% in
the West, and down (15.6)% in the South.

Other


Real gross domestic product (GDP) increased at an annual rate of 3.2% in the
fourth quarter of 2023, according to the “second” estimate released by the
Bureau of Economic Analysis. In the third quarter, real GDP increased 4.9%.


Real GDP increased 2.5% in 2023 (from the 2022 annual level to the 2023 annual
level), compared with an increase of 1.9% in 2022. The increase in real GDP in
2023 primarily reflected increases in consumer spending, nonresidential fixed
investment, state and local government spending, exports, and federal
government spending that were partly offset by decreases in residential fixed
investment and private inventory investment. Imports decreased.


Sales at furniture and home furnishings stores were up 1.4% in January 2024
from December 2023 on a seasonally adjusted basis, but down 9.8% from January
2023.


The Consumer Price Index for All Urban Consumers increased 0.3% in January on
a seasonally adjusted basis, after rising 0.2% in December, the U.S. Bureau of
Labor Statistics reported today. Over the last 12 months, the all-items index
increased 3.1% before seasonal adjustment.

Thoughts


Economic indicators, as well as our monthly stats, continue to provide mixed
results and accordingly, expectations for 2024.


Overall consumer confidence took a step back in February 2024, which seems at
odds with positive economic data such as steady employment, diminishing
inflation, and a strong stock market.


Housing is also showing some signs of life despite the current interest rate
environment, and though expected to come slowly and methodically, there
appears to be help on the way in the form of mid-year interest rate cuts from
the Fed that should drive additional housing and furniture sales activity.


Consistent with many economic reports, the Conference Board is no longer
forecasting a general recession for 2024, though we know the furniture
industry tends to move at its own pace.


People we’ve spoken to recently within the industry are largely cautiously
optimistic about 2024 and that recent trends and positive outlooks for the
coming year will outweigh the negative factors associated with the election
and international concerns that seem to dominate the news cycle.

 


This Furniture Insights® newsletter report has been re-published with
the permission of Smith Leonard PLLC an independent member of the BDO
Seidman Alliance.

Firm Profile: Founded in 1930 by BDO Seidman, LLP, the High Point, North
Carolina practice was recently acquired by four individuals who have spent
the majority of their 100+ year careers building the existing practice.
Beginning January 1, 2007, Smith Leonard PLLC became an independent member
of the BDO Seidman Alliance. Partners are Ken Smith, Darlene Leonard, Jon
Glazman and Mark Bulmer. Among the firm’s 32 employees are 18 CPAs.

Service Area – Smith Leonard concentrates primarily in the Triad, but
also services companies with domestic locations throughout North Carolina,
Virginia, South Carolina and Texas.

Smith Leonard has an extensive network of international relationships that
helps service their clients’ needs throughout the world with locations
in Asia, Europe, South America, Mexico and Canada. These companies range in
revenue size of $2 million to $300 million.

Practice Concentration – The majority of the client base is composed
of manufacturing and distribution companies.

Many of its clients are either furniture manufacturers, distributors or
suppliers to the furniture industry. Smith Leonard also services companies
in retail, transportation, insurance, not-for-profit entities and employee
benefit plans. Smith Leonard offers a full range of accounting and
consulting services including audits, compilations, reviews, tax planning
and compliance. The partners and staff of Smith Leonard also assists clients
in mergers, acquisitions, business consulting, cash flow projections, and
tax outsourcing. Individual clients benefit from extensive experience in
family wealth services including estate tax planning.

The firm continues to produce monthly and annual statistics for the
furniture industry. For more information call (336) 883-018 or
e-Mail: ksmith@smithleonardcpas.com.



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