Executive Summary

Once again, the results of our survey requires some explanation. On the surface, the results were beginning to show some slowdown in business which has been somewhat expected. December new orders were down 6% from December 2020. But looking back, December 2020 new orders were up 27% over December 2019. So, December 2021 new orders were up 19% over December 2019, continuing the string of good business for the industry. For the year, new orders were up 14% over 2020 when they were up 15% over 2019. The results for the year showed that 77% of the participants had increased orders for the year.

Shipments in December fell 2% from last December when they were up 5% from December 2019. December 2021 shipments were up 2% over December 2019. Supply chain, lack of workers, freight, among other things, continue to keep shipments from catching up. The increased orders coupled with shipments not able to keep up, meant backlogs continued to grow, with December backlogs up 46% over last December when they were up 168% over December 2019.

Receivable and inventory levels seem to be in good shape. From what we see, most customers are keeping current in order to get product when it is available. Inventories continue to grow with materials as well as imported finished goods. The number of factory and warehouse employees is up from last year but nowhere near what is needed. As expected, payrolls are up due to some more people but also due to increased wages in order to attract and keep people.

National

Consumer Confidence

The Conference Board Consumer Confidence Index® fell slightly in February, after a decrease in January. The Index now stands at 110.5 (1985=100), down from 111.1 in January. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—improved to 145.1 from 144.5 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—declined to 87.5 from 88.8.

Lynn Franco, Senior Director of Economic Indicators at The Conference Board said “Consumer confidence was down slightly for a second consecutive month in February. The Present Situation Index improved a touch, suggesting the economy continued to expand in Q1 but did not gain momentum. Expectations about short-term growth prospects weakened further, pointing to a likely moderation in growth over the first half of 2022. Meanwhile, the proportion of consumers planning to purchase homes, automobiles, major appliances, and vacations over the next six months all fell. Despite this reversal, consumers remain relatively confident about short-term growth prospects. While they do not expect the economy to pick up steam in the near future, they also do not foresee conditions worsening.”

Housing

Existing-home sales improved in January compared to December with all four regions showing increases but the comparison to January 2021 was mixed in the regions. Single family sales were only down 2.6% from last year. The demand is still there with people expecting mortgage rates to increase. But inventories of homes is still very low. “The inventory of homes on the market remains woefully depleted, and in fact is currently at an all-time low,” Lawrence Yun, NAR’s chief economist said.

Sales of new single‐family houses in January 2022 fell 4.5% below the revised December rate and were 19.3% below the January 2021 estimate.

Compared to January 2021, sales were down 46.8% in the Northeast, 37.1% in the Midwest, and 23.8% in the South but up 5.3% in the West.

Privately‐owned housing starts in January were 4.1% below the revised December estimate but were 0.8% above the January 2021 rate. Compared to January 2021 single family starts were down 2.4% overall with starts down 38.0% in the Northeast, 11.7% in the Midwest, 2.2% in the South but up 13.9% in the West.

Other

Advance estimates of U.S. retail and food services sales for January 2022 increased 3.8% from the previous month, and were 13.0% above January 2021. Total sales for the November 2021 through January 2022 period were up 16.1% from the same period a year ago.

Retail trade sales were up 4.4% from December 2021, and up 11.4% above last year. Gasoline stations were up 33.4% from January 2021, while food services and drinking places were up 27.0% from last year. On an adjusted basis, sales at furniture and home furnishings stores were up 2.7% over January 2021. January 2021 sales at these stores were up 11.7% over January 2020.

As for consumer prices, the all-items index rose 7.5% for the 12 months ending January, the largest 12-month increase since the period ending February 1982. The all items less food and energy index rose 6.0%, the largest 12-month change since the period ending August 1982. Increases in the indexes for food, electricity, and shelter were the largest contributors to the seasonally adjusted all items increase.

The Conference Board Leading Economic Index® (LEI) for the U.S. decreased by 0.3% in January, following a 0.7% increase in December and a 0.8% increase in November. The report noted that the LEI posted a small decline as the Omicron wave, rising prices, and supply chain disruptions took their toll. initial claims for unemployment insurance, consumers’ outlook and declines in stock prices, and the average work week in manufacturing all contributed to the decline—the first since February 2021.

Thoughts

Business has continued to be very good for most in the industry. While new order writing has tended to show some slower growth, that is probably good for most. Many have looked for more capacity but finding people to work there is a different story, so backlogs remain a significant issue. Also prices have continued to have to be raised, but it appears that retail customers are accepting the increases, reluctantly of course, but realizing that the needs are real. And retail customers, who do not know what furniture should cost, hear that prices are up but realize, most everything is going up.

The Russia/Ukraine issue will create more problems around the world as most any sanctions that will have meaningful results will have negative results on the U.S. as well as other countries. We will not attempt to get into all of that other than to say that the pandemic has caused enough issues, and serious fighting in Ukraine will have some serious effects of the world economy and the U.S. We can only hope that it is short lived.

In the meantime, we are expecting the April market in High Point to look the most like normal in quite some time. We think most folks are going to be looking for new ideas and products and hopefully finding that more and more products are becoming available as backlogs are working down. But consumers that are still buying like to see new products even with long wait times, as they are becoming used to those wait for many other needs, such as appliances, vehicles, and many other items.