January 2025 Furniture Insights Report From Smith Leonard

Furniture World News Desk on 2/5/2025

MONTHLY RESULTS

New Orders

According to our latest survey of residential furniture manufacturers and distributors, new orders were down 9% in November 2024 compared to November 2023, reverting to the negative trend seen in May – September 2024. Approximately 40% of participants reported increases versus decreases in November 2024 compared to a year ago. Year to date through November 2024, new orders are now down 1% compared to 2023, not adjusted for inflation. However, new orders were up 5% compared to the prior month of October 2024.

Shipments and Backlogs

November 2024 shipments were down 1% from November 2023, and flat with October 2024. Shipments in November 2024 were down for approximately 67% of the participants compared to November 2023.

Year to date through November 2024, shipments remained down 7% compared to 2023.

November 2024 backlogs were down 10% compared to November 2023, but up 1% from October 2024 as current new orders outpaced shipments during the last month.

Receivables and Inventories

Receivable levels were up 1% from October 2024, but down 4% from November 2023, both of which are materially in line with the respective shipment trends, given normal timing differences with collections.

Inventories were consistent with October 2024 at up 1% and down 4% from November 2023, which are in line with prior periods and current operational levels.

Factory and Warehouse Employees and Payroll

The number of factory and warehouse employees remained down 5% from November a year ago, but even with the prior month.

Payroll expense was down 1% in November 2024 compared to October 2024. Year to date through November 2024, payroll expense is again down 3%, which is materially consistent with the employee headcount and prior periods

NATIONAL

Consumer Confidence

The Conference Board Consumer Confidence Index® declined by 5.4 points in January to 104.1 (1985=100). December’s reading was revised up by 4.8 points to 109.5 but was still down 3.3 points from the previous month.

The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell sharply in January, dropping 9.7 points to 134.3.

The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—fell 2.6 points to 83.9, but remained above the threshold of 80 that usually signals a recession ahead.

“Consumer confidence has been moving sideways in a relatively stable, narrow range since 2022. January was no exception. The Index weakened for a second straight month, but still remained in that range, even if in the lower part,” said Dana M. Peterson, Chief Economist at The Conference Board. “All five components of the Index deteriorated but consumers’ assessments of the present situation experienced the largest decline. Notably, views of current labor market conditions fell for the first time since September, while assessments of business conditions weakened for the second month in a row. Meanwhile, consumers were also less optimistic about future business conditions and, to a lesser extent, income. The return of pessimism about future employment prospects seen in December was confirmed in January.”

By age group, January’s fall in confidence was led by consumers under 55 years old. Consumers aged 55+ saw a small uptick in confidence. By income group, the sharpest decline in confidence was seen in households earning over $125K, while consumers at the bottom of the income range reported the strongest gains. The confidence gap between the top income groups and those making between $75K and $100K narrowed.

Peterson added: “Nonetheless, there were positive notes in other aspects of the survey. Consumers’ views of their Family’s Current Financial Situation were more positive, and six-month expectations for family finances reached a new series high. The proportion of consumers anticipating a recession over the next 12 months was stable near the series low. (These measures are not included in calculating the Consumer Confidence Index®.) Consumers also remained bullish about the stock market, even if a bit less so than at the end of 2024. Over half of consumers (52.9%) expected stock prices to increase over the year ahead, compared to just 23.7% who expected stock prices to decline.”

The proportion of consumers anticipating a recession over the next 12 months was stable near the series low. Meanwhile, consumers’ assessments of their Family’s Financial Situation—both current and over the next six months—weakened. (These measures are not included in calculating the Consumer Confidence Index®.).

Average 12-month inflation expectations increased from 5.1% to 5.3% in January, likely reflecting stickier inflation in recent months. Additionally, references to inflation and prices continue to dominate write-in responses. More than half (51.4%) of consumers now expect higher interest rates over the next 12 months. The share expecting lower rates dropped from 28.5% last month to 23.9% in January. This is consistent with recent signaling by the Fed that the pace of interest rate cuts may slow in 2025, as well as ongoing increases in mortgage rates.

On a six-month moving average basis, purchasing plans for homes and cars were flat in January. More consumers planned to buy big-ticket items over the next six months than not, but that share was down slightly. Consumer buying plans were flat for most appliances and still down for electronics on a six-month moving average basis. Separately, consumers continued to express intentions to purchase additional services in the months ahead, especially dining out and streaming. Vacation plans continued to trend downward at the start of 2025.

Present Situation
Consumers’ assessments of current business conditions deteriorated in January.

18.4% of consumers said business conditions were “good,” down from 21.0% in December.
15.4% said business conditions were “bad,” unchanged from December.

Consumers’ appraisals of the labor market plunged in January.

33.0% of consumers said jobs were “plentiful,” down from 37.1% in December.
16.8% of consumers said jobs were “hard to get,” up from 14.9%.

Expectations Six Months Hence

Consumers were less optimistic about the outlook for business conditions in January.

20.9% of consumers expected business conditions to improve, down from 22.7% in December.
18.7% expected business conditions to worsen, up from 17.3%.

Consumers’ assessments of the labor market outlook remained pessimistic.

19.4% of consumers expected more jobs to be available, down slightly from 19.8% in December.
20.3% anticipated fewer jobs, unchanged from December.

Consumers’ assessments of their income prospects were less optimistic in January.

18.3% of consumers expected their incomes to increase, down from 19.0% in December.
11.9% expected their incomes to decrease, down from 12.1%.

Assessment of Family Finances and Recession Risk

Consumers’ assessments of their Family’s Current Financial Situation improved in January.
Consumers’ assessments of their Family’s Expected Financial Situation reached a new high.
Perceived Likelihood of a US Recession over the Next 12 Months remained near the series low.

Leading Economic Indicators

The Conference Board Leading Economic Index® (LEI) for the US inched down by 0.1% in December 2024 to 101.6 (2016=100), after an upwardly revised increase of 0.4% in November. The LEI declined by 1.3% over the second half of 2024, slightly less than its 1.7% decline over the first half of the last year.

“The Index fell slightly in December failing to sustain November’s increase,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “Low consumer confidence about future business conditions, still relatively weak manufacturing orders, an increase in initial claims for unemployment, and a decline in building permits contributed to the decline. Still, half of the 10 components of the index contributed positively in December. Moreover, the LEI’s six- month and twelve-month growth rates were less negative, signaling fewer headwinds to US economic activity ahead. Nonetheless, we expect growth momentum to remain strong to start the year and US real GDP to expand by 2.3% in 2025.”

The Conference Board Coincident Economic Index® (CEI) for the US rose by 0.4% in December 2024 to 114.1 (2016=100), following a 0.2% increase in November. As a result, the CEI increased by 0.9% in the six-month period ending December 2024, slightly higher than its 0.7% growth over the previous six months. The CEI’s four component indicators— payroll employment, personal income less transfer payments, manufacturing and trade sales, and industrial production—are included among the data used to determine recessions in the US. They all improved in December, with the largest positive contribution coming from industrial production, which contributed negatively in three out of the past six months. This was followed by personal income less transfer payments, payroll employment, and manufacturing and trade sales.

The Conference Board Lagging Economic Index® (LAG) for the US increased by 0.1% to 118.5 (2016=100) in December 2024, after an increase of 0.2% in November. However, the LAG’s six-month growth rate remained negative at 0.5% over the second half of 2024, a partial reversal from its 0.8% increase over the first half of 2024.

Gross Domestic Product

The increase in real GDP in the fourth quarter primarily reflected increases in consumer spending and government spending that were partly offset by a decrease in investment. Imports, which are a subtraction in the calculation of GDP, decreased.

Compared to the third quarter, the deceleration in real GDP in the fourth quarter primarily reflected downturns in investment and exports. Imports turned down.

Real GDP increased 2.8% in 2024 (from the 2023 annual level to the 2024 annual level), compared with an increase of 2.9% in 2023. The increase in real GDP in 2024 reflected increases in consumer spending, investment, government spending, and exports. Imports increased.

The price index for gross domestic purchases increased 2.3% in 2024, compared with an increase of 3.3% in 2023. The PCE price index increased 2.5%, compared with an increase of 3.8%. Excluding food and energy prices, the PCE price index increased 2.8%, compared with an increase of 4.1%.

HOUSING

Existing-Home Sales

Existing-home sales climbed in December, according to the National Association of REALTORS®. Sales advanced in three major U.S. regions and slipped in the Midwest. Year-over-year, sales accelerated in all four regions.

On an annual basis, existing-home sales (4.06 million) declined to the lowest level since 1995, while the median price reached a record high of $407,500 in 2024

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – elevated 2.2% from November to a seasonally adjusted annual rate of 4.24 million in December. Year-over-year, sales swelled 9.3% (up from 3.88 million in December 2023).

"Home sales in the final months of the year showed solid recovery despite elevated mortgage rates," said NAR Chief Economist Lawrence Yun. "Home sales during the winter are typically softer than the spring and summer, but momentum is rising with sales climbing year-over-year for three straight months. Consumers clearly understand the long-term benefits of homeownership. Job and wage gains, along with increased inventory, are positively impacting the market."

Single-family home sales moved higher by 1.9% to a seasonally adjusted annual rate of 3.83 million in December, up 10.1% from the prior year. The median existing single-family home price was $409,300 in December, up 6.1% from December 2023.

Existing condominium and co-op sales increased 5.1% in December to a seasonally adjusted annual rate of 410,000 units, up 2.5% from one year ago (400,000). The median existing condo price was $359,000 in December, up 4.5% from the previous year ($343,500).

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.96% as of January 23. That’s down from 7.04% one week ago but up from 6.69% one year ago.

Total housing inventory registered at the end of December was 1.15 million units, down 13.5% from November but up 16.2% from one year ago (990,000). Unsold inventory sits at a 3.3-month supply at the current sales pace, down from 3.8 months in November but up from 3.1 months in December 2023.

The median existing-home price for all housing types in December was $404,400, up 6.0% from one year ago ($381,400). All four U.S. regions posted price increases.

According to the monthly REALTORS® Confidence Index, properties typically remained on the market for 35 days in December, up from 32 days in November and 29 days in December 2023.

First-time buyers were responsible for 31% of sales in December, up from 30% in November 2024 and 29% in December 2023. NAR’s 2024 Profile of Home Buyers and Sellers – released November 2024 – found that the annual share of first-time buyers was 24%, the lowest ever recorded.

Regional

In December, existing-home sales in the Northeast grew 3.9% from November to an annual rate of 530,000, up 10.4% from December 2023. The median price in the Northeast was $478,900, up 11.8% from last year.

In the Midwest, existing-home sales slid 1.0% in December to an annual rate of 990,000, up 6.5% from the prior year. The median price in the Midwest was $298,600, up 9.0% from December 2023.

Existing-home sales in the South increased 3.2% from November to an annual rate of 1.93 million in December, up 9.0% from one year before. The median price in the South was $361,800, up 3.4% from one year earlier.

In the West, existing-home sales rose 2.6% in December to an annual rate of 790,000, up 12.9% from a year ago. The median price in the West was $614,500, up 6.0% from December 2023.

New Residential Sales

Sales of new single-family houses in December 2024 were at a seasonally adjusted annual rate of 698,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.6% above the revised November rate of 674,000 and is 6.7% above the December 2023 estimate of 654,000.

An estimated 683,000 new homes were sold in 2024. This is 2.5% above the 2023 figure of 666,000.

The median sales price of new houses sold in December 2024 was $427,000 ($403,000 in November 2024). The average sales price was $513,600 ($485,000 in November 2024).

Compared to December 2023 on a seasonally-adjusted basis, sales were up 6.7% overall with sales also up 0.5% in the South, 40.3% in the Midwest, 25.9% in the Northeast, and 6.9% in the West.

Housing Starts

Privately-owned housing starts in December were at a seasonally adjusted annual rate of 1,499,000. This is 15.8% above the revised November estimate of 1,294,000, but is 4.4% below the December 2023 rate of 1,568,000.

Single-family housing starts in December were at a rate of 1,050,000; this is 3.3% above the revised November figure of 1,016,000.

The December rate for units in buildings with five units or more was 418,000 (264,000 in November).

Single-family starts compared to December 2023, on a seasonally-adjusted basis, were down 2.6% in total, as well as down 1.8% in the South and down 15.1% in the West, but up 8.5% in the Northeast and up 14.3% in the Midwest.

Housing Completions

Privately-owned housing completions in December were at a seasonally adjusted annual rate of 1,544,000. This is 4.8% below the revised November estimate of 1,621,000 and is 0.8% below the December 2023 rate of 1,557,000.

Single-family housing completions in December were at a rate of 948,000; this is 7.4% below the revised November rate of 1,024,000.

The December rate for units in buildings with five units or more was 570,000 (544,000 in November)

Single-family completions compared to December 2023, on a seasonally-adjusted basis, were down 0.8% in total and also down 21.2% in the South, but up 28.0% in the Midwest, 1.9% in the West, and 21.6% in the Northeast.

OTHER NATIONAL

Retail Sales

Advance estimates of U.S. retail and food services sales for December 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $729.2 billion, an increase of 0.4% from the previous month, and up 3.9% from December 2023. Total sales for the 12 months of 2024 were up 3.0% from 2023. Total sales for the October 2024 through December 2024 period were up 3.7% from the same period a year ago.

Retail trade sales were up 0.6% from November 2024, and up 4.2% from last year. Motor vehicle and parts dealers were up 8.4% from last year, while Nonstore retailers were up 6.0% from December 2023.

Sales at furniture and home furnishings stores were up 2.3% in December 2024 from November 2024 on a seasonally-adjusted basis, and up 8.4% from December 2023. However, sales were still down 2.2% for year to date December 2024 compared to the same period for 2023 on an unadjusted basis (were down 3.3% YTD November 2024).

Consumer Prices

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4% on a seasonally adjusted basis in December, after rising 0.3% in November, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all-items index increased 2.9% before seasonal adjustment.

The index for energy rose 2.6% in December, accounting for over forty percent of the monthly all-items increase. The gasoline index increased 4.4% over the month. The index for food also increased in December, rising 0.3% as both the index for food at home and the index for food away from home increased 0.3% each.

The index for all-items less food and energy rose 0.2% in December, after increasing 0.3% in each of the previous 4 months. Indexes that increased in December include shelter, airline fares, used cars and trucks, new vehicles, motor vehicle insurance, and medical care. The indexes for personal care, communication, and alcoholic beverages were among the few major indexes that decreased over the month.

The all-items index rose 2.9% for the 12 months ending December, after rising 2.7% over the 12 months ending November. The all- items less food and energy index rose 3.2% over the last 12 months. The energy index decreased 0.5% for the 12 months ending December. The food index increased 2.5% over the last year.

Employment

Total nonfarm payroll employment increased by 256,000 in December, and the unemployment rate changed little at 4.1%, the U.S. Bureau of Labor Statistics reported. Employment trended up in health care, government, and social assistance. Retail trade added jobs in December, following a job loss in November.

The unemployment rate changed little at 4.1% in December. After increasing earlier in the year, the unemployment rate has been either 4.1% or 4.2% for the past 7 months. The number of unemployed people, at 6.9 million, also changed little in December

Durable Goods Orders and Factory Shipments

New orders for manufactured durable goods in November, down three of the last four months, decreased $3.3 billion or 1.2% to $284.7 billion, down from the previously published 1.1% decrease. This followed a 0.7% October increase. Transportation equipment, also down three of the last four months, led the decrease, $2.9 billion or 3.0% to $95.4 billion. New orders for manufactured nondurable goods increased $1.2 billion or 0.4% to $301.4 billion.

Shipments of manufactured durable goods in November, down four consecutive months, decreased $0.5 billion or 0.2% to $284.9 billion, down from the previously published 0.1% decrease. This followed a 0.5% October decrease. Transportation equipment, also down four consecutive months, drove the decrease, $1.0 billion or 1.1% to $90.7 billion. Shipments of manufactured nondurable goods, up two consecutive months, increased $1.2 billion or 0.4% to $301.4 billion. This followed a 0.2% October increase. Chemical products, up nine of the last ten months, led the increase, $0.7 billion or 0.9% to $82.5 billion.

On a seasonally-adjusted basis, shipments for furniture and related products were up 0.3% compared to the prior month, while new orders were also up 0.4%. On a non-adjusted basis, year to date shipments for furniture and related products were up 0.8% compared to the prior year, while year to date new orders were up 1.4%.

Executive Summary

New orders were down 9% in November 2024 compared to November 2023, reverting to the negative trend seen in May – September 2024, after a reprieve in October 2024. Year to date through November 2024, new orders are now down 1% compared to 2023. However, new orders were up 5% compared to the prior month of October 2024.

November 2024 shipments were down 1% from November 2023, and flat with October 2024.

November 2024 backlogs were down 10% compared to November 2023, but up 1% from October 2024.

Receivable levels were up 1% from October 2024, but down 4% from November 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 Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell sharply in January, dropping 9.7 points to 134.3.

Housing

Total existing-home sales – completed transactions that include singlefamily homes, townhomes, condominiums and co-ops – elevated 2.2% from November to a seasonally adjusted annual rate of 4.24 million in December. Year-over-year, sales swelled 9.3% (up from 3.88 million in December 2023).

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.96% as of January 23. That’s down from 7.04% one week ago but up from 6.69% one year ago.

Compared to December 2023 on a seasonally-adjusted basis, sales were up 6.7% overall with sales also up 0.5% in the South, 40.3% in the Midwest, 25.9% in the Northeast, and 6.9% in the West.

Other

Real gross domestic product (GDP) increased at an annual rate of 2.3% in the fourth quarter of 2024 (October, November, and December), according to the advance estimate released by the U.S. Bureau of Economic Analysis. In the third quarter, real GDP increased 3.1%. The increase in real GDP primarily reflected increases in consumer spending, exports, nonresidential fixed investment, and federal government spending. Imports increased.

Thoughts

As of press time, the big news is obviously the recently announced tariffs on Mexico (25%, though now delayed), Canada (25% with 10% carveout for energy, but apparently subject to further discussion later today), and China (additional 10%).

It’s difficult to know the extent of the impact the tariffs will have on the furniture industry and overall economy if fully implemented. In addition to the pure importers and those with hybrid operations, many companies that would be considered “domestic” manufacturers still source certain fabric, frames, and various components from foreign vendors.

While likely greatly oversimplifying a very complex situation, an additional 10% tariff on Chinese goods would seem manageable given the inflationary pressures the industry has dealt with in the last few years, coupled with the long product pipeline allowing time for companies to make necessary adjustments.

What seems more immediately concerning is the potential impact of tariffs on Canadian lumber utilized by the US housing industry as well as Canadian energy and the impact that could have on inflation in general, and specifically, consumer spending, interest rates, and ultimately housing activity that drives the furniture industry.

This all follows a Vegas market which was largely reported to be positive, an averted port strike last month, as well as recent gains in housing and positive trends at retail.

What makes this situation so difficult are the unknowns, the volatility, and the potential for change/reversals with or without notice, including the potential for tariffs on other Asian countries such as Vietnam and the impact of expected retaliatory tariffs on US exports.

Those in the industry are certainly smart enough and experienced enough to navigate any playing field, but they just need to know the rules of the game they’re playing. So, while these items are certainly disruptive in the short-term, the industry has dealt with similar situations in the past and we’re hopeful there are still enough things trending in the right direction so that the positive outlook for 2025, especially the second half, will materialize for those who have worked so hard to get to this point.

This Furniture Insights® newsletter report has been re-published with the permission of Smith Leonard PLLC an independent member of the BDO Seidman Alliance.

Firm Profile: Founded in 1930 by BDO Seidman, LLP, the High Point, North Carolina practice was recently acquired by four individuals who have spent the majority of their 100+ year careers building the existing practice. Beginning January 1, 2007, Smith Leonard PLLC became an independent member of the BDO Seidman Alliance. Partners are Ken Smith, Darlene Leonard, Jon Glazman and Mark Bulmer. Among the firm's 32 employees are 18 CPAs.

Service Area – Smith Leonard concentrates primarily in the Triad, but also services companies with domestic locations throughout North Carolina, Virginia, South Carolina and Texas.

Smith Leonard has an extensive network of international relationships that helps service their clients’ needs throughout the world with locations in Asia, Europe, South America, Mexico and Canada. These companies range in revenue size of $2 million to $300 million.

Practice Concentration – The majority of the client base is composed of manufacturing and distribution companies.

Many of its clients are either furniture manufacturers, distributors or suppliers to the furniture industry. Smith Leonard also services companies in retail, transportation, insurance, not-for-profit entities and employee benefit plans. Smith Leonard offers a full range of accounting and consulting services including audits, compilations, reviews, tax planning and compliance. The partners and staff of Smith Leonard also assists clients in mergers, acquisitions, business consulting, cash flow projections, and tax outsourcing. Individual clients benefit from extensive experience in family wealth services including estate tax planning.

The firm continues to produce monthly and annual statistics for the furniture industry. For more information call (336) 883-018 or e-Mail: ksmith@smithleonardcpas.com.

Over 155 Years of Service to the Furniture Industry

January 2025 Furniture Insights Report From Smith Leonard

MONTHLY RESULTS

New Orders

Shipments and Backlogs

Receivables and Inventories

Factory and Warehouse Employees and Payroll

NATIONAL

Consumer Confidence

Leading Economic Indicators

Gross Domestic Product

HOUSING

Existing-Home Sales

Regional

New Residential Sales

Housing Starts

Housing Completions

OTHER NATIONAL

Retail Sales

Consumer Prices

Employment

Durable Goods Orders and Factory Shipments

Executive Summary

National

Consumer Confidence

Housing

Other

Thoughts

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