September was a grim month for suppliers to the construction industry. Data which revealed weakening order books and activity was only relieved by news of a pick-up in mortgage approvals and of good financial performance by housebuilders. For companies serving the furniture industry the latest sales figures were little better, with UK demand sharply down, but offset by increased export sales.

New construction orders in the second quarter of 2011 were the lowest since 1980, driven by a slump in public housing and infrastructure projects. The total volume of orders fell by 16% during the quarter, and by 23% compared with the same period in 2010.

Public housing orders dropped 31% in the second quarter and by 32% annually, as other public sector orders fell 26% and 43% over the corresponding periods.

New private housing orders fell by 8% compared with the previous quarter but rose 21% year-on-year, while second-quarter orders for new commercial buildings fell by 5% on the quarter and by 13% annually. In contrast, the volume of new orders for industrial projects rose 7% in the second quarter, but fell 10% compared with a year earlier.

Activity slows

The Markit/CIPS construction purchasing managers index (PMI) for August revealed that activity slowed to its lowest level for eight months. Contraction in the housing sector continued, although at a slightly slower pace than in July, but an improvement in commercial work was outweighed by weakness in civil engineering.

Input costs accelerated to a three-month high in August, according to the PMI, and purchasing activity weakened, while business confidence among construction firms dropped to an eight-month low. “Though overall activity is still in growth territory, there may be some question about whether this will continue for much longer,” said CIPS chief executive David Noble.

On a brighter note, mortgage approvals rose by 1.5% in July to 49,239 according to the Bank of England. This was the third consecutive monthly improvement and approvals are now 3% up on July 2010 and have been accompanied by upbeat financial reports from major homebuilders.

Nonetheless, UK consumer confidence deteriorated further in August. A poll for the European Commission by GfK NOP shows it is now as weak as on two previous occasions when it reflected a slide into recession.

Furniture sales fall

Furniture sales declined in August, according to the British Retail Consortium. Although end-of-season discounts boosted garden furniture sales, fitted kitchens and bathrooms suffered badly and underlying trade “remained tough”.

But UK exports of furniture grew by 14% annually in the second quarter of 2011. Overseas sales of other wood and wood products fell by 2%, while demand for veneer sheets and plywood, and of builders’ carpentry, rose by 14% and 10% respectively.

Key PMI surveys for manufacturing suggest that activity in the UK and other major economies shrank in August. And the services sector – the biggest part of the UK economy – witnessed an “eye-watering decline”.

Faltering economies, in the UK and globally, are fuelling expectations of a second downturn, to be followed by a much longer than previously forecast period of economic pain as national debt is slowly paid down and growth eventually returns to pre-recession levels.