Smith Leonard Releases Furniture Insights for October 2024

November 3, 2024  by Karen Parrish in Business Strategy, Industry   

Executive Summary
New orders were down 7% in August 2024 compared to August 2023, which follows the 5% year over year decline last month. However, new orders were up 12% compared to the prior month of July 2024. Year to date through August 2024, new orders are still up 1% compared to August 2024 shipments were down 10% from August 2023, but up 14% from July 2024, likely driven by last month’s 4th of July holiday. Year to date through August 2024, shipments are down 8% compared to 2023.

August 2024 backlogs were down 10% compared to August 2023, and down 5% from July 2024.

Receivable levels were up 6% from July 2024, but down 5% from August 2023, both of which are in line with the respective shipment trends.

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.

Consumer Confidence

The Conference Board Consumer Confidence Index® increased in October to 108.7 (1985=100), up from 99.2 in September.

The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased by 14.2 points to 138.0.

The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—increased by 6.3 points to 89.1, well above the threshold of 80 that usually signals a recession ahead.

“Consumer confidence recorded the strongest monthly gain since March 2021, but still did not break free of the narrow range that has prevailed over the past two years,” said Dana M. Peterson, chief economist at The Conference Board.

“In October’s reading, all five components of the Index improved. Consumers’ assessments of current business conditions turned positive. Views on the current availability of jobs rebounded after several months of weakness, potentially reflecting better labor market data. Compared to last month, consumers were substantially more optimistic about future business conditions and remained positive about future income. Also, for the first time since July 2023, they showed some cautious optimism about future job availability.”

On a six-month moving average basis, purchasing plans for homes and new cars continued to increase. When asked about plans to buy more durable goods or services over the next six months, consumers continued to express a slightly greater preference for purchasing goods. Consumer buying plans for big-ticket appliances were mixed and buying plans for electronics were slightly down.

Real gross domestic product (GDP) increased at an annual rate of 2.8% in the third quarter of 2024, according to the “advance” estimate released by the U.S. Bureau of Economic Analysis. In the second quarter, real GDP increased 3.0%.

The increase in real GDP primarily reflected increases in consumer spending, exports, and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

Compared to the second quarter, the deceleration in real GDP in the third quarter primarily reflected a downturn in private inventory investment and a larger decrease in residential fixed investment. These movements were partly offset by accelerations in exports, consumer spending, and federal government spending. Imports accelerated.

Sales at furniture and home furnishings stores were down 1.4% in September 2024 from August 2024 on a seasonally-adjusted basis, and down 2.2% from September 2023. Sales were also down 5.1% for year to date September 2024 compared to the same period for 2023 on an unadjusted basis.

Mark Laferrier, assurance partner at Smith Leonard commented, "It was good to see old friends and new in sunny High Point this last week for the Fall Furniture Market. While the Market Authority reported that traffic was down slightly, the mood of market seemed to be largely positive, though the U.S. elections and potential for tariffs were also on many people’s minds."

"Generally speaking, of the companies we visited with, those with more significant designer customer bases seem to be faring better at the moment as the retail business continues to be challenging. Certain economic factors do seem to be slowly inching in the right direction, though most people we spoke to, as well as thought leaders in the industry, believe that an increase in housing inventory and activity will be needed for the industry as a whole to fully recover."

Laferrier concluded, "However, this is all nothing new for the industry and most companies have figured out how to survive and even thrive in the current environment as they await a return to normalcy, hopefully by the middle of 2025."