BDO Issues April Report

July 5, 2006  by in UnCategorized   

By Home Furnishings Business in on July 2006 The timing of April High Point market had a lot to do with a 13 percent drop in new residential furniture orders in April, compared to last year, and a 26 percent decrease from March 2006.

That’s according to BDO Seidman’s Furniture Industry Services’ monthly report on order and shipment activity.

In 2005, market took place April 14-21, while this year’s event ran April 27-May 4, with the result of much of this spring’s market orders not being included in April results.

Almost 80 percent of respondents to BDO’s supplier survey reported April-to-April decreases in order. Year-to-date, new orders through April were up 1 percent over 2005, but the report indicated that market orders impacted those results, as orders were up 5 percent through March.

Shipments fell 6 percent in April 2006 versus April 2005. Again some of that decrease may have been somewhat impacted by the late market, although not to the same degree. Almost 80 percent of the participants reported a decline in shipments although not to the same extent as orders.

The April decrease in shipments brought the year-to-date shipment levels to about even with the first four months of last year.

April 2006 backlogs fell to 6 percent from March levels and were 3 percent lower than April last year, with the report citing a lower new-order rate and a smaller decline in shipments.

Looking at economic activity and indicators in general, BDO’s report indicated the following:

* The Federal Reserve’s Beige Book summary report indicated that economic activity continued to expand from mid-April to early June, but showed moderation in four districts: Atlanta, Kansas City, Richmond and San Francisco; while the New York district noted increased concerns about the outlook for the second half. Overall, the reports were for the most part mixed.

* Real gross domestic product increased in the first quarter of 2006 at an annualized rate of 5.6 percent, compared to a 1.7 percent increase in the fourth quarter and preliminary estimates of 5.3 percent. The first-quarter increase reflected positive contributions from personal consumption expenditures, exports, equipment and software, and federal government spending. Imports, a subtraction from the GDP, increased.

* The Conference Board’s U.S. leading index decreased 0.6 percent in May, while the coincident index increased 0.1 percent, and the lagging index increased 0.2 percent.

The leading index decline was the third in the last six months. The largest negative contributors were initial claims for unemployment insurance (inverted) and the index of consumer expectations.

* The Conference Board Consumer Confidence Index, which decreased in May to 104.7, increased slightly in June to 105.7. The Present Situation Index decreased to 132.7 from 134.1, while the Expectation Index increased to 87.6 from 85.1 last month.

* Sales of existing homes slipped 1.2 percent in May compared to April to a seasonally adjusted rate of 6.67 million units, and were 6.6 percent below the 7.14 million-unit level of May 2005.

* The national median existing home price was $230,000 in May, up 6.0 percent from May 2005.

* Single-family home sales fell 1.5 percent to a seasonally adjusted annual rate of 5.82 million in May, from 5.91 million in April, and were also 6.6 percent below May of 2005. Sales of single-family homes increased slightly in the South and West, but fell 3.8 percent in the Midwest and 4.2 percent in the Northeast.

* Sales of new one-family homes rose 4.6 percent above the revised April rate, reaching a seasonally adjusted annual rate of 1.234 million according to the U.S. Census Bureau. This rate was 5.9 percent below the May 2005 rate, similar to the sales of existing homes. The median price of new homes sold in May was $235,300.

* Non-farm employment rose by 75,000 jobs in May. The unemployment rate was 4.6 percent according to the Bureau of Labor Statistics. Employment continued to trend up in some service-providing industries and mining, while retail trade and manufacturing lost jobs.

* Retail trade sales were up 0.1 percent over April and 7.5 percent ahead of last year. Gasoline stations were up 21.9 percent over last May, and sales of non-store retailers were up 14.1 percent.

* Sales at furniture and home furnishings stores were 0.5 percent down from April on an adjusted basis, but were 7.4 percent above May 2005. Year-to-date sales at these stores were reported 9.3 percent ahead of the first five months of last year.

* The Consumer Price Index for All Urban Consumers increased 0.5 percent in May before seasonal adjustment and was up 0.4 percent on an adjusted basis.

* Energy costs continued to advance--up 2.4 percent in May. Within energy, the index for petroleum-based energy increased 4.8 percent while energy services fell 0.6 percent.

* New orders for manufactured durable goods decreased 0.3 percent in May. This was the second consecutive monthly decline, and followed a 4.7 percent decrease in April. Excluding transportation, new orders increased 0.7 percent. Excluding defense, new orders decreased 0.1 percent.

* Shipments of manufactured durable goods increased 2.6 percent. Shipments have now been up three of the last four months and marked the highest level since the series changed the basis for measuring in 1992.

* According to the final report for April, shipments of furniture and related products fell 3.6 percent in April from March and were 4.8 percent higher than last April. BDO concluded that “related products” must be doing better than the “furniture” piece of this category. Year-to-date, shipments in this category were reported to be up 8 percent.

BDO’s latest forecast after actual March results indicates a pretty flat first half of the year, even though April was worse than the latest forecast. The second half of the year is expected to improve over last year by about 5 percent. It appears that 2006 is somewhat a reversal of the 2005 results, when shipments were up 5 percent in the first half of 2005, but only up 1.5 percent in the last half. This year, the opposite appears to be happening.

The final results of BDO’s annual operating statistics report indicate that operating profits for all companies reporting fell from 5.26 percent of sales to 3.69 percent. Case goods companies fell about 1 percent while upholstery companies fell about 1.8 percent. Most of the decline in upholstery was attributed to higher material costs as a result of higher costs of petroleum based products caused by the hurricanes.