HIGH POINT, N.C. - New orders for residential furniture rose 26% in November compared to 2022 figures, marking seven straight months of double-digit percentage growth in the year-over-year comparison, according to the latest issue of Furniture Insights. Roughly two-thirds of the participants reported increased orders in November 2023 compared to a year ago.

"While there is considerable 'noise' behind these numbers (including the impact of general inflation and container rate fluctuations to name just two), this does mark the 7th straight month orders have grown double-digit percentages over the prior year, so there does appear to be some traction," said Mark Laferriere.  assurance partner at Smith Leonard, which produces the monthly report.

Year to date, new orders were up 4% over the same period of 2022, although 2022-to-date orders were down 34% over the same period of 2021, Laferriere noted. 

"As we’ve stated previously, comparisons to prior years have been difficult due to the unprecedented circumstances impacting the industry since mid-2020, but that does seem to be normalizing, even if still not at the levels we’d prefer."

Shipments in November were down 16% from 2022 figures, according to Smith Leonard, with two-thirds of survey participants reporting a decline. Year to date, 2023 shipments were down 17% over the first 11 months of 2022. 

"So despite recent improvement in monthly new orders, annual trends continue to be affected by many companies shipping from their historically high backlogs through much of 2022. Accordingly, November 2023 backlogs were up a modest 3% from October 2023, but down 35% compared to November 2022," Laferriere added.

Receivable levels were up 5% from October, but down 13% from November 2022 figures, which Laferriere said is "materially in line with the year-to-date decline in shipments."

Inventory levels were flat in October 2023 and down 29% from November 2022, which is consistent with the 35% decline in backlogs, "indicating that most companies have rebalanced their inventory levels to match current operations."

On an adjusted basis, sales at furniture and home furnishings stores in December were down 4.6% from December 2022 and down 5.4% year to date.

"The general economic indicators as well as our monthly stats continue to provide mixed results and accordingly, mixed expectations for 2024," Laferriere noted. "Overall consumer confidence is trending in a positive direction, though housing remains fairly stagnant. Other factors, such as inflation, supply chain, stock market performance (though perhaps overvalued), and employment data are also favorable or at least manageable. On the flip side, there are international and election concerns to consider.

"Perhaps the expected rate cuts in 2024 (Fed meeting as of publication), coupled with improving confidence, will stimulate growth in housing which drives furniture sales. However, it seems rate cuts may be slow to materialize as the Fed is able to work methodically, with the economy adequately shuffling along."

He added, "The Conference Board still suggests there will be a short recession during the middle of 2024 (Q2-Q3) before recovering late in the year. If not already feeling it, we all know that furniture tends to be one of the first to feel the effects of a recession and one of the last to recover.

"So, while new orders are trending positively year-over-year, many of the companies we speak with have seemingly adjusted to operating at the 'old normal' (meaning back to 2019 volumes). However through gradual implementation and holding of price increases, coupled with manageable cost inflation as of late, many have seen consistent or improved gross profits despite flat or declining revenue (as adjusted for inflation). Generally, upholstery (particularly custom) appears to be stronger than case goods and high-end stronger than low-end goods, though there are always exceptions.

"With more time to breathe and look internally after returning to historical norms following an extended period of unprecedented demand, we hope companies will 'control what you can control,' be open to change and opportunities, look at processes and ways to operate more efficiently throughout the organization, and to invest in relationships with their employees, customers, vendors, lenders, and most importantly, accountants."