HIGH POINT, N.C. – New residential furniture orders dropped 8% in October compared to the year prior, following the gain in September. The latest Furniture Insights survey of residential furniture manufacturers and distributors from Smith Leonard indicates 70% of survey participants reported decreased orders for the period.
“We have continued to talk with people using the term ‘choppy’ when describing business in the residential furniture industry as it relates to manufacturers and distributors, said Ken Smith, managing partner at Smith Leonard, who noted the High Point Market being one week later than in 2018 may have had some impact on the timing of orders.
Year to date, new orders were 2% lower than the same period a year ago with 73% of the participants reporting lower order rates. Last year, orders were up 6% year to date, according to the accounting and consulting firm.
The December 2019 Furniture Insights report also shows October shipments rose 6% compared to 2018 figures and were down 5% from September. Year to date, shipments remained even with last year. “Backlogs were basically even with September as well as even with last October. We would note that backlogs in October 2018 were 14% higher than October 2017 so backlogs have been reduced pretty substantially as business has slowed over 2019,” Smith said.
Receivable levels were up 3% over October 2018, and up 3% over September 2019 figures, although that could be due to timing. “Receivables continue to be reasonable considering shipment levels. Inventories remained high, 11% higher than last year, down from 12% reported last month,” Smith noted.
October inventories were up 2% from September and 11% higher from October a year ago. “The 11% increase compares to a 12% increase reported last month. We hope the inventories can be reduced over the new year as current business does not seem to support these higher levels of inventories,” he added.
On an adjusted basis, sales at furniture and home furnishings stores were up 1.9% from November 2018. Year to date, sales at these stores were up 0.4% up from 0.1% reported last month.
“Overall, the economy continues to do reasonably well,” Smith said. “We think the survey results may be affected by several things, but we would point out one not mentioned recently. We think deflation has something to do with the lower orders. The deflation we are describing now may not be coming necessarily from cheaper Asian produced products, but maybe by the impact that many believe that the millennial generation have not reached a mature buying age. Therefore, these consumers may be buying cheaper products and also buying through non-traditional sources, which is probably not reflected in our more traditional suppliers.”