From Home Furnishing Business
Statistically Speaking: Furniture Industry Benefits from Federal and State Stimulus More than Other Industries
While the pandemic sent much of the economy into a tailspin, the Federal stimulus money and unemployment benefits that began at the end of March padded consumer disposable income – jumping 17% in the month of April. Disposable income continued to grow but at a slower rate through September, the most recent data available. Most likely due to uncertainty about the future, many consumers put a lot of the extra stimulus cash into savings, causing consumer expenditures in total to be down 5.3% for the pandemic period March to September.
But what consumers did not stow away, they spent a lot on their homes – furniture, appliances, new carpet, window treatments, and yard equipment. Tables A, B, and C detail 2020 monthly consumer spending for key home furnishings products compared to the same months in 2019. Note that furniture spending, due in part to forced retail closures, fell to $100 billion dollars (annualized) in April, the lowest level since April 2015. Product growth will be discussed in more depth later in this article.
In addition to stimulus checks and unemployment benefits, for many consumers extra cash was freed up from numerous sources impacted by the government virus shutdown. A few of the cash sources included eating at home as opposed to restaurants (but higher grocery bills), saving on gasoline from not driving to work or school, curbing vacation and travel, giving up gym memberships, closed entertainment facilities or venues, and reduced or postponed physician and dental visits.
This quarter’s Statistically Speaking takes a detailed look into all the sources of disposable income and where consumers have put it through the pandemic, with a focus on growth in furniture and home furnishings. Disposable Income Beginning in late March, disposable income rose significantly during the first seven months of the pandemic, up 9.0% compared to March to September 2019 (Table D). Moderate monthly increases of 2% to 4% in the first quarter skyrocketed to 17% disposable income growth in April during the start of the of the stay-at-home orders as full Federal pandemic stimulus arrived. As parts of the economy began to open in May through July, disposable income increased another 11.3%, 9.4%, and 10%, respectively. As Federal stimulus ended by August, disposable income slowed but continued to improve over 2019, up 6.2% in August and 7.1% in September.
What did the consumer do with the influx of pandemic money and the rise in disposable income? As shown in Table E, most consumers saved a lot of it, feeling uncertain of the future. Compared to saving an average of 7.5% of disposable income in 2019, consumers saved 33.6% in April 2020 during the initial stimulus, 18.1% in July and 14.3% in September. Meanwhile, consumer spending fell significantly in April to 63.7% of disposable income but has continued to gain back share, up to 82.9% in September. This compares to 89% in all of 2019.
The excessive growth in disposable income is a reflection of the changes in the sources of personal income, shown in Table F. In 2019 year-end, wages and salaries accounted for the majority (50.2%) of personal income. In April 2020, that percentage dropped to 41% as many people lost their jobs or were furloughed. Meanwhile, the percent of personal income from government social benefits skyrocketed from 16.6% in 2019 YE to 31.1% in April 2020. By September, when much of the stimulus had dried up, wages and salaries as a contribution to personal income was still below half at 47.4% and government benefits finished the month at 20.8% of personal income.
Personal income (seasonally adjusted at annual rates) grew from $18.5 trillion 2019 YE to $21.1 trillion in April as stimulus checks were distributed. At press time, personal income had fallen to $19.8 trillion in September, still 7.1% above 2019 year-end levels. Figure 1 compares the primary sources of income: (1) wages and salaries, (2) government social benefits to persons (impacted by the stimulus), and (3) personal income receipts on assets (interest and dividend income). As Figure 1 shows, combined unemployment insurance benefits and COVID stimulus dollars grew over 1700% in April compared to April 2019. Meanwhile wages and salaries were down 8.2% in April, impacted negatively by job losses but positively by government stimulus to businesses.
Personal Consumption Expenditures
Despite dramatic growth in disposable income during the early months of the pandemic, the high rate of consumers choosing to funnel income into personal savings contributed to the decline of consumer spending since March (Table G). Personal Consumption Expenditures dropped 16.1% in April and declined another 9.2% in May compared to the same months in 2019. Once the pandemic reached June, the consumer became more comfortable and spending began to increase. By September of this year, consumer spending gained momentum but was still down 0.5% compared to last year.
Consumer spending is divided into three broad categories – Durable goods, like furniture and automobiles; Nondurable goods, like food and clothing, and Services, like transportation, hotels, physician visits, restaurants and drycleaners. As shown in Figure 2, durable goods were hardest hit during the initial retail lockdown of the pandemic in April but grew rapidly once retail establishments opened up in May. Meanwhile, spending on services, which is the largest share of the three broad categories, posted the most long-term negative impact.
Table H details the monthly growth in the three spending categories for select pandemic months. Spending on durable goods, the smallest of the spending categories fell by 9.8% in March followed by 21.1% in April. On the positive side, durable goods were also the fastest to recover (Figure 1) – bouncing back to 12.1% of total expenditures by August and 12.3% in September with the furniture industry benefiting from the uptick.
For nondurable goods, food for consumption at home (grocery stores, not restaurant sales), is a large part of this category and takes into account what little growth nondurable goods have experienced since spending fell 9.6% in April (Table H) as the consumer sheltered in place. However by September nondurables were up 4% over September 2019.
Meanwhile, spending on services includes many industries with long-lasting negative impacts from the pandemic that were the last to open or are still unable to open due to state mandates. Compared to 2019, spending on services started to decline in March before falling 17.1% in April versus April 2019. Spending has continued to drop below 2019 levels, but at a slower rate (Table H).
Consumer Spending on Furniture
As expected, with furniture stores and many factories closed and consumers holding on to their income, spending on furniture tanked from March to April – falling 23% over April 2019. Growth began slightly in May (1.2%) before jumping 15.9% in June compared to 2019. Momentum was maintained through July, August, and September as furniture expenditures increased by 15.1%, 13.2%, and 14.3% respectively (Table I). Year-to-date September, the industry is up 5.5% compared to the same period last year.
As shown in Table J, alongside furniture expenditures increasing beginning in May, other home furnishings categories saw positive growth once consumers felt more comfortable spending their disposable income. After dropping 21.7% in April, clocks, lamps, lighting fixtures, and other household decorative items increased 8.7% in September 2020. During the same time period, spending on carpets and other floor coverings fell 15.7% in April, but by September showed growth of 15.5%. Spending on window coverings fell 11.4% in April but rebounded by September, up 9.7% (Table J).
In addition to furniture and home furnishings, consumers also turned to outdoor equipment, appliances and electronics during the pandemic. Expenditures for both house and garden tools/equipment and personal computers/tablets never decreased year-over-year in April as consumers nested in their homes. Spending on both items then skyrocketed through the coming months (Table K). While major household appliances and televisions did dip down by over 12% during the month of April, both were up 8.6% and 3.7% by September compared to the same months in 2019.
Pandemic’s Temporary or Permanent Impacts
Many changes in the daily routine and lifestyle of Americans since the pandemic began have had at least a temporary negative or positive impact on many industries, including the furniture and home furnishings industry.
Pandemic Lifestyle Trends
- Remote connectivity from home (includes work, education, tele-medicine, and others)
- Renewed interest in the home; spending more time there and creating an inviting and comfortable environment
- Adapting to fewer entertainment choices outside the home -- movie theaters, concerts, sporting events, restaurants, etc.
Some of these routines/lifestyles, were they to continue, could possibly have permanent impact and long-term implications for many industries. Figure 3 lists just a few of the industries impacted by COVID-19 that stand to lose a lot or gain a lot and the growth they have lost or gained since the pandemic began in March. It also highlights the possible negative or positive outlooks going forward.