Executive Summary

The results of our final survey for 2022 of residential furniture manufacturers and distributors continued the latest trends of declines in orders from the very high order rates of 2020 and 2021. New orders in December 2022 were down 31% from December 2021 and down 33% for the year, following 14% and 15% increases reported in the prior two years.

The good news in the report is that shipments were up 3% over last December and were up 5% year to date, after increasing 20% in 2021 over 2020. For the year, shipments were up for 94% of the participants. The increase in shipments came from reducing backlogs as they were down 43% from last December. Backlogs are still healthy (maybe too much for some), but some companies are beginning to not feel as comfortable as some backlogs are down to normal levels and some even below.

Receivable levels continue in good shape with those levels in line with monthly shipment levels as well as year-to-date. Inventory levels remain too high for most, but with orders trending down, it is not easy to bring inventories down quickly.

The factory and warehouse number of employees and payrolls remained in line with previous months reflecting the shortage of employees as well as increased wages for most in order to attract people to the industry.

National

Consumer Confidence

The Conference Board’s Consumer Confidence Index decreased in February for the second consecutive month. The Index now stands at 102.9, down from 106.0 in January. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased to 152.8 from 151.1 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—fell further to 69.7 from a downwardly revised 76.0 in January. Notably, the Expectations Index has now fallen well below 80—the level which often signals a recession within the next year. It has been below this level for 11 of the last 12 months.

“Consumer confidence declined again in February. The decrease reflected large drops in confidence for households aged 35 to 54 and for households earning $35,000 or more,” said Ataman Ozyildirim, Senior Director, Economics at The Conference Board.

Housing

Existing-home sales fell for the twelfth straight month in January. Month-over-month sales were mixed among the four major U.S. regions, as the South and West registered increases, while the East and Midwest experienced declines. All regions recorded year-over-year declines.

Total existing-home sales completed transactions that include single-family homes, townhomes, condominiums, and co-ops – slid 0.7% from December 2022 to a seasonally adjusted annual rate of 4.00 million in January. Year-over-year, sales retreated 36.9% (down from 6.34 million in January 2022).

Single-family home sales declined to a seasonally adjusted annual rate of 3.59 million in January, down 0.8% from 3.62 million in December and 36.1% from one year ago. The median existing single-family home price was $363,100 in January, up 0.7% from January 2022.

“Home sales are bottoming out,” said NAR Chief Economist Lawrence Yun. “Prices vary depending on a market’s affordability, with lower-priced regions witnessing modest growth and more expensive regions experiencing declines.”

Other

Advance estimates of U.S. retail and food services sales for January 2023 were up 3.0% from the previous month, and up 6.4% above January 2022. Total sales for the period November 2022 through January 2023 were up 6.1% from the same period a year ago.

Retail trade sales were up 2.3% from December 2022, and up 3.9% above last year. Food services and drinking places were up 25.2% from January 2022, while general merchandise stores were up 4.5% from last year. Sales on an adjusted basis at furniture and home furnishings stores were up 3.8%. Sales at these stores for January were up 4.5% on an unadjusted basis.

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.5% in January on a seasonally adjusted basis, after increasing 0.1% in December. Over the last 12 months, the all-items index increased 6.4% before seasonal adjustment. The index for shelter was by far the largest contributor to the monthly all-items increase, accounting for nearly half of the monthly all-items increase, with the indexes for food, gasoline, and natural gas also contributing.

The all-items index increased 6.4% for the 12 months ending January; this was the smallest 12-month increase since the period ending October 2021. The all-items-less-food-and-energy index rose 5.6% over the last 12 months, its smallest 12-month increase since December 2021. The energy index increased 8.7% for the 12 months ending January, and the food index increased 10.1% over the last year.

The Conference Board Leading Economic Index® (LEI) for the U.S. fell by 0.3% in January 2023 to 110.3, following a decline of 0.8% in December. The LEI is now down 3.6% over the six-month period between July 2022 and January 2023—a steeper rate of decline than its 2.4% contraction over the previous six-month period (January–July 2022).

“The US LEI remained on a downward trajectory, but its rate of decline moderated slightly in January,” said Ataman Ozyildirim, Senior Director, Economics, at The Conference Board. “Among the leading indicators, deteriorating manufacturing new orders, consumers’ expectations of business conditions, and credit conditions more than offset strengths in labor markets and stock prices to drive the index lower in the month. The contribution of the yield spread component of the LEI also turned negative in the last two months, which is often a signal of recession to come. While the LEI continues to signal a recession in the near term, indicators related to the labor market—including employment and personal income—remain robust so far. Nonetheless, The Conference Board still expects high inflation, rising interest rates, and contracting consumer spending to tip the US economy into recession in 2023.”

Thoughts

In recent conversations, business appears to continue to slow for most and those that are not feeling the slow down yet, are not really that comfortable that incoming orders are steady. In addition, pricing pressures are building as freight costs have come down as well as some material costs. We hope that all will continue to try to keep the better margins even if reductions in freight, etc. are given.

We hate to keep beating the same drum, but there is no reason to give in to the pressures to get prices down, due to lower consumer demand. It was proven during the last couple of years, that furniture can be sold to consumers at reasonable prices, especially since they proved that they do not know what a piece should cost. So, retailers, wholesalers, and manufacturers should not give up the reasonable margins that they were able to obtain in the last couple of years.

A final thought on our survey results. The comparisons have been difficult during these times when price increases were given for all the various reasons. When wholesale prices have gone up for many in the 25 to 30% ranges, it has been difficult to determine what the real increases in business have been. Now some price concessions are being given especially freight reductions as well as other material cost declines, so we will just continue to tell participants to compare their results with an eye on the impact of their own units sold.

We hope the bad weather out West and, in the North, does not affect business too much. The good weather in the South should help business here. Best of luck to all.

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