Smith Leonard September 2024 Furniture Insights

October 2, 2024  by Karen Parrish in Business Strategy, Industry   

New orders were down 5% in July 2024 compared to July 2023, which follows the 6% year over year decline in June 2024. New orders were also down 9% compared to the prior month of June 2024.

However, year to date through July 2024, new orders are still up 2% compared to 2023, though that spread has continued to narrow with the last three months’ declines.

July 2024 shipments were up 6% from July 2023, but down 7% from June 2024. Year to date through July 2024, shipments are down 7% compared to 2023. July 2024 backlogs were down 11% compared to July 2023, and down 3% from June 2024.

Receivable levels were down 3% from June 2024, but flat with July 2023. Inventories and employee/payroll levels are again materially in line with recent months, but down from 2023, indicating that companies have aligned levels to match current operations.

National

Consumer Confidence

The Conference Board Consumer Confidence Index® fell in September to 98.7 (1985=100), from an upwardly revised 105.6 in August.

The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell by 10.3 points to 124.3.

The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—declined by 4.6 points to 81.7, but remained above 80. (A reading below the threshold of 80 usually signals a recession ahead.)

“Consumer confidence dropped in September to near the bottom of the narrow range that has prevailed over the past two years,” said Dana M. Peterson, chief economist at The Conference Board.

“September’s decline was the largest since August 2021 and all five components of the Index deteriorated. Consumers’ assessments of current business conditions turned negative while views of the current labor market situation softened further. Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future income.”

Against this backdrop, consumer buying plans for big-ticket appliances were mixed and plans to buy a smartphone or laptop/PC in the next six months eased. However, on a six-month moving average basis, purchasing plans for homes and new cars improved slightly. When asked about plans to buy more goods or services over the next six months, consumers showed a slightly greater preference for purchasing goods.

Other
Real gross domestic product (GDP) increased at an annual rate of 3.0% in the second quarter of 2024, according to the “third” estimate released by the U.S. Bureau of Economic Analysis. In the first quarter, real GDP increased 1.6%.

The increase in real GDP primarily reflected increases in consumer spending, private inventory investment, and nonresidential fixed investment. Imports increased.

Compared to the first quarter, the acceleration in real GDP in the second quarter primarily reflected an upturn in private inventory investment and an acceleration in consumer spending. These movements were partly offset by a downturn in residential fixed investment.

Sales at furniture and home furnishings stores were down (0.7)% in August 2024 from July 2024 on a seasonally-adjusted basis, and down the same (0.7)% from August 2023. Sales were also down (5.1)% for YTD August 2024 compared to the same period for 2023 on an unadjusted basis.

Thoughts from Mark LaFerrier, Assurance Partner, Smith Leonard Accountants & Consultants

"Our hearts go out to our many friends and associates that have been negatively affected by Hurricane Helene this last week. The human toll is obviously heartbreaking. And while it’s impossible to fully grasp the current or long-term impact this will have for the overall industry for an area that is so essential to the production and distribution of product nationwide, we know those within the industry are never short on resilience."

"Consumer confidence really took a real beating in September and there wasn’t much to get excited about from the other national economic indicators in August/September either.

However, the long-awaited interest rate cut finally arrived in September in the form of a half point reduction, with the potential for another quarter or half point in November, now that inflation has eased, and the labor market is not as tight in the Fed’s view. Unfortunately, the expected positive impact to housing and ultimately the home furnishings industry will not happen overnight."

"Meanwhile, ocean container rates continue to decline in September compared to summer peaks per the World Container Index, though as of this morning, there is now a port strike along the East Coast and Gulf of Mexico to contend with."

"And lastly, on a positive note, it’s almost time for the Fall Furniture Market here in High Point and we look forward to seeing many of you in town later this month."