HIGH POINT, N.C. - Although new residential furniture orders rose 29% in August 2023 compared to the year prior, the results continue to be a mixed bag, noted Ken Smith, managing partner at Smith Leonard, which produces the monthly Furniture Insights.

"Unfortunately the comparison is not quite as rosy as it may seem as new orders in August 2022 were down 34% from August 2021 and August 2021 orders were down 14% from August 2020. So as has been the case for over a couple of years, the comparisons can be misleading without context. Add to that the impact of price increases and lately price decreases, primarily for foreign freight charges, and the comparisons become even more murky,"  Smith said. Approximately 72% of the survey participants reported new order increases.

Year to date, new orders were about even compared to the same period in 2022, with roughly 40% of participants reporting gains, according to the latest issue of Furniture Insights. Further comparison shows year-to-date new orders were down 29% in 2022 compared to 2021, when they were up 29% from 2020, the report shows.

Shipments in August were down 17% from August 2022 figures, but were up 34% over July, primarily because of the normal July shutdowns for vacations, according to Smith Leonard. Shipments in August were down for some 72% of the participants.

Backlogs continued to fall in August, down 51% from last year and also down from July figures, Furniture Insights reported. "The dollar amount of backlogs is probably higher than piece counts, again due to price increases built in much of the new backlogs, even considering freight declines."

Receivable levels dropped 30% from October 2022. "With year-to-date and even monthly sales down in the 17 to 18% range, the decline in receivables appears out of line, but we believe that many of our participants in the upholstery business, tend to report their receivables net of customer deposits. As backlogs have been declining, the amount of customer deposits has also declined, which would make the change in net receivables appear to be higher. As backlogs continue to get back to normal levels, we think the receivable results should get back in line," Smith noted.

Inventory levels fell in August, down 2% from July and down 32% from August 2022. "It appears that inventories are much more in line with current business levels after the large buildups over the last couple of years."

On an adjusted basis, September sales at furniture and home furnishing stores were down 5.9% from 2022 figures for the month and down 4.4% (unadjusted basis) year to date.

"Overall, the residential furniture business is probably sluggish at best. And there seems to be many reasons," Smith commented. "While the overall economy seemed to grow at a strong pace in the third quarter, some of those measurements do not really reflect what consumers are seeing and doing. Yes, they are still spending but the rising costs of living clearly have an impact on furniture spending. Add to that the rising mortgage interest rates, there are just not enough dollars left in consumer budgets to pay for deferrable purchases."

He added, "The leading economic indicators have declined for over a year and a half. Nine of the indexes ten components have either declined or were flat in September. The Conference Board forecasts that the trends are such that a shallow recession is expected in the first half of 2024. If that is true, the residential side of the business may face more turbulence as many would say certain parts, if not most parts, are already in somewhat of a recession in 2023."

Smith continued, "On the other hand, we thought the October High Point market was well attended and once again, the 'mood' of market was very good. Great new product was shown. Even though many echoed the thoughts that attendees loved our product and were very happy with our showing, the only problem was the 'they must have forgotten their pens.” But that great product will sell eventually as consumers come back to the stores or their designers suggest they just have to have some of the new product. People came and some will buy. We hope whatever this 'slow down' ends soon, but think one needs to be prepared to ride it out a bit longer than most probably think."