Furniture Orders Rebound in May

July 30, 2012  by in UnCategorized   

By Home Furnishings Business in economic news on July 31, 2012

After dropping in April, retailer orders for furniture rebounded in May, according to the latest Furniture Insights report.

New orders in May rose 10 percent compared with the same month last year, and increased 17 percent compared with April. High Point accounting and consulting firm Smith Leonard produces the monthly survey of residential furniture manufacturers and distributors.

The 10 percent increase in May (after the 13 percent decline in April) was not enough to bring the year-to-date increase back up to the 8 percent increase reported in the first quarter.

The May increase in orders was expected, said Smith Leonard Managing Partner Ken Smith.

"Orders through the March 2012 quarter were up 8 percent so while the timing of Market did have some impact, the results confirmed what we had been hearing about the slower business conditions in April and May," he said. "The good news for this report is that shipments remained fairly strong with May shipments up 7 percent over May 2011. Obviously shipments turn eventually to cash so that is a good thing. Year-to-date, shipments are now up 9 percent over the first 5 months of last year.

May shipments rose 7 percent from May 2011 and 8 percent from April.

"This increase reduced year-to-date shipments from an increase of 10 percent reported last month to a 9 percent increase for the first 5 months of the year," Smith said.
 
Backlogs dropped slightly (less than a half-percent) as shipments exceeded orders for the month. Backlogs were up 5 percent over May of 2011, up from 3 percent last month, due to the low order rate in April.

"In March, backlogs were 18 percent higher than March 2011, so clearly the continued increase in shipments compared to order rates is bringing backlogs down significantly," Smith said.
 
Receivables rose 1 percent over last year despite the 7 percent increase in shipments. Receivables increased 2 percent from April even though shipments were 8 percent higher in May versus April.

Inventories were up 3 percent from April and were 8 percent higher than May 2011, compared with a 6 percent increase for April 2012 versus April 2011.

"While the increase in inventories is not out of line with the increase in shipments, we will need to keep a close eye on inventories with the decline in orders," Smith said.
 
Factory and warehouse employees increased 4 percent over May 2011, down from a 6 percent increase reported last month. The number of employees fell 1 percent from April, so the number of employees could reflect softer business.
 
Factory and warehouse payrolls rose 3 percent over May 2011 down from an 8 percent increase comparing April to April.

"With shipments exceeding orders, backlogs have come down significantly," Smith noted in summary. "In March, backlogs were 18 percent higher than March 2011. Backlogs in May were only 5 percent higher than May 2011 so eventually we will see shipment increases decline if orders do not pick up pretty soon.
 
"Receivable levels remained in good shape. Inventories were up 8 percent over last May, not really out of line with shipments and earlier orders, but will need to be watched if business continues to soften. From what we have heard from most, we do not expect to see significant improvements in the June numbers. We seem to be just moving along somewhat like the economy, which does not have many bright spots."
 
Smith did identify one bright spot: housing.

"While the newsmakers talked about the slowdown in existing home sales, most failed to mention that some of that was caused by a shortage of homes for sale in parts of the country," he said. "This appears to be causing home prices to start back up. Once homeowners think the market has improved, we may see more come on the market, though it is doubtful these prices will return to pre-recession levels.
 
"Housing starts and completions and new residential sales are also on the rise especially compared to a year ago. This could really help stabilize the economy as that puts more people in a wide variety of jobs back to work."
 
A 24-hour news cycle blasting consumers with worldwide problems, though, is hampering consumer confidence.

"We can't even switch to sports talk radio now without hearing all the bad news from Penn State et al. No wonder consumer confidence is down," Smith said. "Hopefully housing can continue to be a bright spot in the economy. That will go a long way towards improving the overall economy. Now, back to some more political ads that really make you joyous.