MONTHLY RESULTS

New Orders

With March 2020 results being the first month showing effects of the COVID-19 virus, we finally saw some of the first poor results of the pandemic. New orders in March were down 29% from March 2019 and down 23% from February 2020. New orders in March were down for 87% of the participants. This followed a 6% increase reported for February when orders were up for 71% of the participants.

Year to date, the March results dropped from a 4% increase for the first two months to an 8% decline through March versus March 2019. For the first quarter, new orders were down for 69% of the participants versus about 68% reporting increases in the first two months.

Shipments and Backlogs

Shipments in March were down 11% from March 2019 after a 4% increase reported last month. Some 68% of the participants reported decreased shipments comparing March to March.

Year to date, shipments were down 4% from the first quarter of last year as some 59% of the participants reported a decline in year to date shipments after being about even for the first two months.

Backlogs fell 16% from February and were down 8% from March 2019 as shipments far exceeded new orders. Fortunately, many had good backlogs to ship from.

Receivables and Inventories

Receivable levels in March were down 5% from March 2019, in line with the decline in year to date shipments, though a bit off from the 11% decline in March to March shipments.

Inventory levels were almost even with February 2020 and up 1% over March 2019. February inventory levels were up 3% over February 2019 levels. We expect that the late March shutdowns did not allow for adjustments to inventory levels.

Factory and Warehouse Employees and Payroll

These comparisons for the next few months will be difficult due to layoffs, furloughs, Payroll Protection Program effects, etc., as by April, some were still paying people from the PPP funds, while others were not. Payrolls were down 13% from March a year ago bringing the year to date results down to a reduction of 3% for the first quarter.

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Consumer Confidence

The Conference Board Consumer Confidence Index® held steady in May, following a sharp decline in April. The Index now stands at 86.6 (1985=100), up from 85.7 in April. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – declined from 73.0 to 71.1. However, the Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – improved from 94.3 in April to 96.9 this month.

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Leading Economic Indicators

The Conference Board Leading Economic Index® (LEI) for the U.S. declined 4.4% in April to 98.8 (2016 = 100), following a 7.4% decline in March, and a 0.2% decline in February. “In April, the U.S. LEI continued on a downward trajectory, after posting the largest decline in its 60-year history in March,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “The erosion has been very widespread, except for stock prices and the interest rate spread which partially reflect the rapid and large response of the Federal Reserve to offset the pandemic’s impact and support financial conditions. The sharp declines in the LEI and CEI suggest that the U.S. economy is now in recession territory.”

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The Conference Board Coincident Economic Index® (CEI) for the U.S. declined 8.9% in April to 96.6 (2016 = 100), following a 1.5% decline in March and a 0.3% increase in February.

The Conference Board Lagging Economic Index® (LAG) for the U.S. increased 4.1% in Aprilto 115.3 (2016 = 100), following 1.7% increase in March, and a 0.4% increase in February.

Regional

As was the case for the month prior, April sales decreased in every region from the previous month’s levels. Median home prices in each region grew from one year ago, with the Northeast and Midwest regions showing the strongest price gains.

April 2020 existing-home sales in the Northeast fell 16.9%, recording an annual rate of 540,000, an 18.2% decrease from a year ago. The median price in the Northeast was $312,500, up 8.7% from April 2019. Existing-home sales decreased 12.0% in the Midwest to an annual rate of 1.10 million, down 8.3% from a year ago. The median price in the Midwest was $229,200, a 9.3% increase from April 2019. Existing-home sales in the South dropped 17.9% to an annual rate of 1.88 million in April, down 16.8% from the same time one year ago. The median price in the South was $249,400, a 6.4% increase from a year ago.

Existing-home sales in the West fell 25.0% to an annual rate of 810,000 in April, a 27.0% decline from a year ago. The median price in the West was $419,300, up 6.1% from April 2019.

New Residential Sales

Sales of new single-family houses in April 2020 were at a seasonally adjusted annual rate of 623,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This was 0.6% above the revised March rate of 619,000, but was 6.2% below the April 2019 estimate of 664,000.

Compared to April 2019, sales were up 26.5% in the Midwest and 4.7% in the South. Sales were down 26.5% in the Northeast and 33.5% in the West. The seasonally adjusted estimate of new houses for sale at the end of April was 325,000. This represents a supply of 6.3 months at the current sales rate.

Housing Starts

The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced that privately‐owned housing starts in April were at a seasonally adjusted annual rate of 891,000. This was 30.2% below the revised March estimate of 1,276,000 and was 29.7% below the April 2019 rate of 1,267,000.

Single-family housing starts in April were at a rate of 650,000; this was 25.4% below the revised March figure of 871,000. Single family starts, comparing April 2020 to April 2019 were down 72.7% in the Northeast, 17.6% in the Midwest, 13.3% in the South and 37.3% in the West. The seasonally adjusted estimate of new houses for sale at the end of April was 325,000. This represents a supply of 6.3 months at the current sales rate.

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Retail Sales

The Census Bureau released the following statement regarding its monthly report. “Due to recent events surrounding COVID-19, many businesses are operating on a limited capacity or have ceased operations completely. The Census Bureau has monitored response and data quality and determined estimates in this release meet publication standards.”

The actual report noted that advance estimates of U.S. retail and food services sales for April 2020, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $403.9 billion, a decrease of 16.4% from the previous month, and 21.6%below April 2019. Total sales for the February 2020 through April 2020 period were down 7.7% from the same period a year ago. Retail trade sales were down 15.1% from March 2020, and 17.8% below last year. Clothing and clothing accessories stores were down 89.3% from April 2019, while nonstore retailers were up 21.6% from last year.

Sales at furniture and home furnishings stores in April were down 66.5% from April 2019. Sales at these stores were down 18.5% for the four months ended April 2020 versus the same period a year ago.

Employment

Total nonfarm payroll employment fell by 20.5 million in April, and the unemployment rate rose to 14.7%, according to the U.S. Bureau of Labor Statistics report. The changes in these measures reflect the effects of the coronavirus (COVID-19) pandemic and efforts to contain it. Employment fell sharply in all major industry sectors, with particularly heavy job losses in leisure and hospitality.

In April, the unemployment rate increased by 10.3 percentage points to 14.7%. This is the highest rate and the largest over-the-month increase in the history of the series (seasonally adjusted data are available back to January 1948). The number of unemployed persons rose by 15.9 million to 23.1 million in April. The sharp increases in these measures reflect the effects of the coronavirus pandemic and efforts to contain it.

Durable Goods Orders and Factory Shipments

New orders for manufactured durable goods in April decreased $35.4 billion or 17.2% to $170.0 billion, according to the advance report by the U.S. Census Bureau. This decrease, down three of the last four months, followed a 16.6% March decrease. Excluding transportation, new orders decreased 7.4%. Excluding defense, new orders decreased 16.2%. Transportation equipment, also down three of the last four months, led the decrease, $23.9 billion or 47.3%.

Shipments of manufactured durable goods in April, down three of the last four months, decreased $41.5 billion or 17.7% to $192.3 billion. This followed a 5.5% March decrease. Transportation equipment, also down three of the last four months, led the decrease, $31.4 billion or 42.7% to $42.1 billion.

According to the final report for March 2020, new orders for furniture and related products increased 2.4% while shipments were up 0.6%. Year to date, orders for these products were up 4.4% while shipments were up 3.9%. Clearly these results were not indicative of the residential furniture sector.

Thoughts

As we noted last month, it is hard to really know what to say about the economy, the furniture industry, and most anything else in this environment. As can be seen in the details, there were records broken in some of the national news or if not records, new marks set from many years ago. As we write this month’s edition, we are starting to open up the economy state by state, but there are so many differences of opinion as to how and how fast to do it.

We do not have April results yet, but we did a straw pole with a small number of manufacturers and distributors early this month. We did not weight it but just as what percentage orders were down in April. The results showed over a 70% decline in orders with expectations for May in the 50% decline range.

Obviously, none of us have seen anything like we are going through at least since the Depression. The Federal Government Programs have certainly helped individual families as well as companies through the PPP and other programs, but there are many folks still in pretty bad financial conditions, as well as other effects of stay at home. And unfortunately, as usual, politics starts to rear its ugly head as well, as there are so many different medical and popular opinions. For every 25 points one side can raise, there are another 25 on the other side. But we believe we will get through all of this and hopefully soon. It appears consumers believe we will, so let’s get things opened back up and see what happens.

Best of luck to all of you in the industry. You have come through struggles before. We know you can do it again. This climb should not take as long as it did in 2008 and thereafter.