Smith Leonard: Factory Orders Off 7% in February

May 1, 2008  by in UnCategorized   

By Home Furnishings Business in on May 2008 New orders for furniture and shipments both were down 7 percent in February compared to the same month last year, according to the monthly survey of residential furniture manufacturers and distributors by the High Point accounting and consulting firm Smith Leonard.

While orders increased 5 percent over January, they’re down 6 percent through 2008’s first two months.

The percentage of participants reporting a decline in orders increased to 60 percent for the year-to-date, up from 52 percent last month.

Shipments were 8 percent higher than January, but shipments and orders are typically higher in February compared to January. Year-to-date, shipments are now 5 percent lower than the first two months of 2007, when they were also off 5 percent from 2006. Similar to percentages in orders, some 57 percent of the participants reported lower shipments compared to the previous year for the first two months.

Backlogs rose 2 percent from January, but were 7 percent below February 2007.

Receivable levels fell 4 percent from January, even with shipments improving over January. Still, February receivables were only down 2 percent from last year, even with the 7 percent decline in shipments versus last year. But, it does appear that receivables are much more in line than they were last month.

Inventory levels fell again in February, down 3 percent from January and down 6 percent from last February.

“These levels appear to be much more in line with current business conditions, although as we have noted in the past, these numbers can be somewhat misleading due to the volume of direct shipments to retailers where those dollars are usually not in the inventory numbers,” Smith Leonard’s report on the survey read.

The number of factory employees was down 2 percent from January 2008. Compared to February 2007, the number of employees was down 8 percent versus 9 percent last month. Factory employees were down 13 percent in February 2007 compared to February 2006.

Factory payrolls were off 10 percent in February 2008 compared to February 2007. Last month, they were off 9 percent. Year-to-date, factory payrolls were off 9 percent from last year.

According to the U.S. Census Bureau, advance estimates of U.S. retail and food services sales for March, adjusted for seasonal variation and holiday and trading-day differences, indicated an increase of 0.2 percent from February and an increase of 2 percent over March 2007. Total sales for the first quarter were up 2.9 percent over the first quarter of 2007.

Sales at furniture and home furnishings stores, on an adjusted basis were down 0.3 percent from February and down 7.1 percent from March 2007. For the first quarter, sales at these stores were down 5.9 percent.

“The February results were pretty much expected based on what we had heard during February and early March. We did hear some signs of improvement in March, but the improvement in orders does not appear to have real traction yet,” the report said in summary. “We are not really expecting any significant improvement anytime soon with all the issues in the economy. We keep hoping that we may have hit the bottom, but the economic news is not helping.”

Smith Leonard noted an upbeat mood at last month’s High Point Market and observed that much-needed price increases for furniture were “all over Market.”