“Most are fortunate to have substantial backlogs to help get through this period and provide better service to customers, but if this should turn into a real recession, how long will the backlogs last?”

HIGH POINT – Residential furniture orders fell 26% in March 2022 over March’s 2021 numbers. But, just like in previous months, numbers are still up over what they were in 2020.

According to accounting firm Smith Leonard’s monthly Furniture Insights survey, March results brought the year-to-date decline in orders to 21% over 2021. Orders were down for 79% of the participants for both the monthly and year-to-date comparisons.

Comparing with 2019, which Smith Leonard says gives a better picture, orders were up 5%, some of which probably reflects price increases that were made in 2021 and 2022.

Shipments were up 19% over March 2021 as backlogs are finally beginning to shrink. Shipments were up 4% year-to-date. Some 76% of the participants reported increased shipments year-to-date, a good thing says Smith Leonard as shipments drive eventual cash. As shipments exceeded orders, backlogs fell 4%. Backlogs were still 20% ahead of last year when they were very high at that time.

Other things to note:

• Receivable levels continue to appear to be in good shape as most receivable ageings look very good. Inventory levels continue to rise, along with the growth in business as well as a hedge against shortages. But they are probably high enough, says Smith Leonard, considering expectations for business to slow as the economy and consumer confidence declines.
• Sales at furniture and home furnishings stores were up 0.8% over April 2021 and up 2.3% year to date. Sales in April 2021 were up almost 20% over sales in 2019.
• The University of Michigan Surveys of Consumers noted that consumer sentiment dropped 9.4% from April reversing gains recorded in April. The declines were broad-based across current conditions as well as expectations.

“It continues to be difficult to deal with the results of our survey as well as the national reports,” Smith Leonard wrote. “For example, the report on retail sales for April for furniture and home furnishings stores showed an 0.8% increase in sales for the month. But sales in April 2021 were up 20% over sales in 2019. But if you do not look back at the data, the national report looks rather weak. We have the same issue with some of our survey results.

“Now the question is, where are we now? The shutdowns in Asia due to the COVID issues there have cut back production and shipments from there to the U.S. allowing U.S. ports to begin to catch up on clearing the ships and warehouses here. That is helping with the flow of goods here to catch up some of the backlogs, but that is just as the economy here is slowing. Inflations, gas prices, declines in the stock market, increased mortgage rates, and rents, along with other issues are beginning to make consumers think before spending on durable goods.

“We, along with most, have been expecting business to slow from the last two years of great business but we wonder how all of the national issues will slow business more than we expected. Most are fortunate to have substantial backlogs to help get through this period and provide better service to customers, but if this should turn into a real recession, how long will the backlogs last?”

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