Executive Summary

We finally finished off our final survey for 2016 results. December was a good month for many of the participants in our survey of residential furniture manufacturers and distributors. New orders in December were up 11 percent over December 2015. For the year, new orders were up 3 percent over 2015 when new orders were up 4 percent over 2014. So in spite of a slow start to the year and some ups and downs throughout the year, 2016 turned out to be a decent year for many.

The November and December 2016 pick-ups were much better than earlier in the year. Most believe that was a result of the elections being over. Not that it mattered as much who won but at least all the negative ads were gone and we could once again see and hear furniture ads.

According to various conversations, we hear that things slowed back down some in January and a bit in February, but Presidents’ Day sales appeared to be good according to some reports.

Shipments were also strong in December, up 15 percent over December 2015. That brought shipments for the year to a 1 percent increase over 2015, when shipments were up 6 percent over 2014. Only about 43 percent of the participants reported increased shipments for the year. The good news was that some 61 percent of the participants reported increased shipments for the month.

Backlogs fell 8 percent from November as shipments exceeded new orders. Backlogs were basically even with December 2015 levels as for the year, shipments and new orders were pretty much even.

Receivables and inventory levels remained in good shape. Inventories fell 3 percent from last December, but it appeared that inventories may have been a bit high in December 2015.

Factory and warehouse employee levels seemed in line with current business. Factory and warehouse payrolls were up in December but that was likely the result of the strong orders and shipments.

Housing

Existing-home sales were strong in January with the report noting that the January pace was the fastest pace in almost a decade. Total sales were up 3.3 percent to a seasonally adjusted rate of 5.69 million, the strongest pace since February 2007.

Single-family sales grew 2.6 percent and were 3.7 percent above January 2016. First-time buyers were 33 percent of sales up from 32 percent in December and from January a year ago.

Existing-home sales rose 5.3 percent in the Northeast, 3.6 percent in the South and 6.6 percent in the West. Sales were down 1.5 percent in the Midwest. Sales were up nicely in all four regions from last year.

New home sales were also up, increasing 3.7 percent above December and 5.5 percent above January 2016. Sales were up over last year 22 percent in the Northeast, 4.5 percent in the Midwest and 16 percent in the West, while sales were down in the South by 1.0 percent.

Privately-owned housing starts were 2.6 percent lower than December but were 10.5 percent above January 2016. Starts were up in all regions of the country except the Midwest where they were off 1.6 percent.

Other

Retail sales in January 2017 were up 0.4 percent from December and 5.6 percent ahead of January 2016. Sales for the quarter ended January were up 4.6 percent over the same period a year ago. Sales at furniture and home furnishings stores were up 1.2 percent over January 2016.

The Consumer Price Index was up 0.6 percent and was up 2.5 percent from the last 12 months. The January increase was the largest since February 2013. A sharp rise in the gasoline index accounted for one-half of the increase. Shelter, apparel and new vehicles were the other major contributors.

Nonfarm employment increased by 227,000 in January. The unemployment rate was little changed at 4.8 percent and the number of unemployed persons remained about the same at 7.6 million. The number of long time unemployed (at 27 weeks or more) was also unchanged at 1.9 million.

Consumer Confidence

The Conference Board’s Consumer Confidence Index improved in February after a slight decline in January. The report indicated that consumer confidence remains at a 15-year high. Expectations improved regarding the short term outlook for business, and to a lesser degree for jobs and income prospects.

The University of Michigan report noted that while this survey showed a slight decline in February, the overall average of the last three months was the highest in more than a decade. The report noted that the sharp partisan divide is unprecedented and will likely cause (once there is no recession, predicted by Democrats and no robust growth, predicted by Republicans) modest GDP growth over the next several months.

Thoughts

It seems that most of the normal factors we consider that affect furniture sales are in good shape. Add to that interest rates while increasing slightly remain at historic lows. The stock markets continue to perform very well. While our results for residential furniture are not that bad, one might ask, with all the favorable things in place, why it is not better. As we discussed with one of our clients last week, maybe we really haven’t gotten over the recession in the back of our minds. Most of us have known people who grew up in the depression days and we know that most of those people continue to remember those bad days.

While our recent (now 8 plus years ago) recession wasn’t nearly as bad as the depression, we wondered if there is not still some lingering effect among folks that just are not convinced that this bubble might burst. While most economists do not expect a recession like the recent one, many people may just not be ready to not believe it could happen.

Hopefully that is not the case and we are still in the jitters from the election. We hope that wears off soon. We might all be better off to only turn on sports on TV.