Smith Leonard Reports 2024 November Insights

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

EXECUTIVE SUMMARY

 New orders were down 9% in September 2024 compared to September 2023, which follows the 7% year over year decline last month. However, new orders were up 5% compared to the prior month of August 2024. Year to date through September 2024, new orders are now even compared to 2023.

September 2024 shipments were down 7% from September 2023, and also down 7% from August 2024. Year to date through September 2024, shipments are down 8% compared to 2023.

September 2024 backlogs were down 10% compared to September 2023, but up 1% from August 2024.

Receivable levels were down 1% from August 2024, and down 8% from September 2023, both of which are materially 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.

National

CONSUMER CONFIDENCE

The Conference Board Consumer Confidence Index® increased in November to 111.7 (1985=100), up 2.1 points from 109.6 in October.

The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased by 4.8 points to 140.9.

The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions— ticked up 0.4 points to 92.3, well above the threshold of 80 that usually signals a recession ahead.

“Consumer confidence continued to improve in November and reached the top of the range that has prevailed over the past two years,” said Dana M. Peterson, Chief Economist at The Conference Board. “November’s increase was mainly driven by more positive consumer assessments of the present situation, particularly regarding the labor market. Compared to October, consumers were also substantially more optimistic about future job availability, which reached its highest level in almost three years. Meanwhile, consumers’ expectations about future business conditions were unchanged and they were slightly less positive about future income.”

On a six-month moving average basis, purchasing plans for homes stalled in November, while purchasing plans for autos were up slightly. 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. In addition, more consumers expressed uncertainty about future purchases. Consumer buying plans for most appliances and electronics were down.

OTHER

Real gross domestic product (GDP) increased at an annual rate of 2.8% in the third quarter of 2024, according to the “second” 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, federal government spending, and nonresidential fixed investment. 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 1.3% in October 2024 from September 2024 on a seasonally-adjusted basis, but up 1.5% from October 2023. Sales were down 3.9% for year to date October 2024 compared to the same period for 2023 on an unadjusted basis.

THOUGHTS FROM MARK LAFERRIER, ASSURANCE PARTNER

I hope everyone here in the States had a relaxing and enjoyable Thanksgiving holiday.

This month, we saw a few of the national economic indicators trending in the right direction, particularly Consumer Confidence and existing-home sales, though new residential housing activity continues to lag behind. These gains will need to be sustained to meaningfully filter down to the furniture industry, as we continue to see a decline in current orders and shipments for participants in our survey compared to a year ago. However, a review of recent public company results does provide some hope in that the year over year declines have narrowed in their last quarterly filings on average.

Early reporting on Black Friday indicates that activity was up overall, though online purchases made up for the reduction at brick-and-mortar retail.

We also saw another 0.25% interest rate cut in November, which followed the 0.50% in September. The Fed meets again in mid- December, so it will be interesting to see how they approach possible tariffs and the potential impact on inflation, future interest rate adjustments, and ultimately housing that drives so much activity in the industry.

While we have seen most of our clients significantly reduce their reliance on China produced goods over the last 10 to 15 years, there is still little doubt that tariffs will be disruptive to the overall industry, providing both challenges and opportunities.

I suppose no one can say we don’t live in interesting times.