Furniture Insights reports offer window into state of industry

Economic data for first several months of 2023 begs the question: Will things get worse before they get better?

HIGH POINT — A review of the past several months of economic data compiled by Smith Leonard’s Furniture Insights reports offers a glimpse of where the industry has been since the start of the year and what may be in store in the coming months.

On the surface it appears the news has not been good. The question is will it get much worse before it gets better?

According to the June report, year-to-date orders as of April were down 19% for more than 80% of the respondents, while shipments were down 14% year to date for only 60% of the respondents.

This compares to an 18% decline in year-to-date orders for 78% of survey participants in March and a 19% decline in year-to-date shipments for 56% of survey participants in March. Meanwhile, in February, orders were down 20% year to date and year-to-date shipments were down 4%.

A key message in each of these reports is that backlogs are getting closer to pre-pandemic levels as orders slow at retail, because of a combination of factors, including still-high inventories and overall slow traffic and sales.

For example, in April, backlogs were down 8% from March and 64% compared with April 2022. Given the extremely high lead times associated with these orders, it’s good that most retailers are getting product a lot quicker than they have been in the past 12 to 18 months. However, it’s another indication that the demand has tapered off significantly, a factor that could lead to industrywide layoffs if things don’t get better soon, the report notes.

Typically, when we track these surveys at Home News Now we tend to focus on the things most relevant to the industry such as orders, shipments, backlogs, receivables and employment at both manufacturing facilities and distribution centers.

But these indicators are just part of the overall mix of economic data covered by the monthly reports. Below are some other highlights we’ve gleaned from the most recent June report, some of which we also cover in housing sales and construction reports and some that we haven’t of late such as consumer confidence and expectations.

+ Overall May existing home sales were down 20.4% from May 2022. This includes a 20% drop in single-family home sales from the previous year. It also follows a 23.2% drop in overall April home sales from April 2022 and a 22.4% drop in single-family home sales from April 2022.

+ In May, the median existing home sales price for all home types was down 3.1% to $396,100 from May 2022. By comparison, the median existing single-family home price was down 3.4% from May 2022, the report noted. In April, the median single-family home price was $393,300, down 2.1% from April 2022.

+ The report also noted that the Consumer Confidence Index rose to 109.7 in June, compared to 102.5 in May. Meanwhile, the Present Situation Index rose to 155.3 from 148.9 in May and the Expectations Index — which reflects consumers’ short-term or six-month outlook about the performance of the overall economy in terms of how it affects them — rose to 79.3 in June from 71.5 in May. According to the Consumer Confidence Board, Expectations have remained below 80 — which is the level reflecting consumer fears of a recession within the next year — every month since February 2022, except for a slight uptick in December 2022.

+ The rise in Consumer Confidence, however, was the highest level since January 2022, which Dana Peterson, chief economist for the Conference Board, said reflects “improved current conditions and a pop in expectations. Nonetheless, the Expectations gauge continued to signal consumers anticipating a recession at some point over the next six to 12 months.”

That obviously could temper consumer spending patterns on big-ticket items like furniture in the months ahead. However, the Consumer Confidence Board indicates there could be a slowdown in vacations in the next six months as well, a major competitor for furniture spending. Thus, this presents an opportunity for the retail segment to promote heavily during the balance of the year, not only for indoor furniture, but also outdoor furniture that represents an opportunity for homeowners to further enjoy their surroundings of their next “staycation.”

In the coming months, we will continue to review these economic trends, ranging from home sales and home construction to consumer confidence and, of course, furniture retail sales. The challenges obviously never go away. But nor do the opportunities, even amidst all the talk of recession, which we’ve not only heard, but have already experienced firsthand in the industry. Recession or not, there continue to be plenty of homeowners and renters to serve with plenty of furniture to sell across all price points.

The point is to be ready as soon as those consumers come walking through your doors.