After a surprise drop in construction output in February a new, robust set of business surveys suggests that the UK economy may now be stabilising.
All three Purchasing Managers Indexes (PMI), covering manufacturing, services, and construction performance in March, continue the upward trend and indicate that increasing activity is supported by rising new orders.
Importantly for the wood and wood products industry, the PMI for construction reveals that activity expanded at its fastest rate in 21 months. Activity in the housing sector rose only modestly, but civil engineering, and commercial sectors saw strong growth.
And with higher activity, purchases of materials rose at their fastest for over four years in March. Further, business confidence about the year ahead reached the highest for almost two years, albeit optimism is well below pre-recession levels.
The NHBC says the average number of daily sales of new homes in February was up 18% on a year earlier, and in the latest three months sales were 7% higher than a year earlier. The RICS reports new buyer interest edged up in March for the first time in nearly two years. But the Bank of England says that in February the number of home loan approvals fell 15%. However, the official house price index rose 0.3%.
The volume of new construction orders placed in the fourth quarter of 2011 was 3% weaker than in the previous quarter, ONS data shows, and was 15% lower than a year earlier. The strongest quarterly growth was in infrastructure work – with orders up 42%.
Officials note that new orders for industrial projects grew 7% on the quarter and by 3% annually, while orders for commercial work dropped by 18% and 4% respectively. Contracts for private housing grew almost 9% in the quarter, and by nearly 5% compared with the same period in 2010. Public housing orders slumped by a quarterly 23%, and fell 57% over the fourth quarter a year ago.
The value of overseas sales of wood and wood products rose by 8% last year, according to official estimates, while imports fell 3%. Nonetheless, imports exceeded exports by £2,669m in 2011, down from £2,782m the previous year. At the same time UK demand for foreign-made furniture dropped 5%, while furniture exports rose 14%.
As consumer confidence took another hit in March, to levels well below historic norms, the BRC says the warm weather helped garden furniture, but indoor furniture suffered.
Official estimates suggest that although retail sales volumes rose 3.3% annually in March, demand for furniture slipped by 0.7% with a monthly drop of 3.5%
Consumer demand for furniture rose by 2.4% in the fourth quarter of 2011 compared with the previous year and was up 5.3% at current prices, according to ONS figures. Over 2011 as whole, volume demand rose just 0.6%, and climbed 2.7% by value.
But with new data showing that inflation is significantly outpacing earnings, household budgets continue to be squeezed and further cuts in spending on non-essentials appear certain.
