The latest slew of economic data – particularly some unexpectedly weak industrial production figures – casts doubt over the expected return to growth, and heightens concern about a possible second downturn.

And this is compounded by news last week that the UK is still in recession, making it the longest since records began in 1955.

In a forecast compiled before the latest output figures were published, the CBI predicts GDP growth of 0.3% in the third quarter of 2009 and 0.4% in the final quarter. But it warned that consumers are spending ahead of the VAT increase in January, and in the face of continuing job losses, household outlays will stay squeezed. Companies are rebuilding stocks but they are likely to do so cautiously, so the outlook is for only anaemic growth in the first and second quarters of 2010.

Unemployment also has the potential to be a major stumbling block to sustained recovery. Figures for the three months to August reveal a further increase, although the pace of decline in the jobs market is easing.

Consumer spending

Nonetheless, a GfK NOP consumer survey in September reveals households are less worried about the economy than at the start of 2009. But it warns “one should be suspicious of a large change in a single month” and that sentiment is still largely negative.

In the high street the spectre of reduced consumer spending remains, despite signs that conditions are beginning to stabilise. Some 39% of retailers in the CBI’s September survey report a rise in year-on-year sales, while 36% said they fell. The resulting balance of +3% follows three consecutive months of falling sales.

In contrast, a balance of 3% of furniture retailers in the survey suffered an annual reduction in sales. But this is an improvement on the two previous months, and British Retail Consortium believes there was a yearly rise in furniture sales in September.

Government estimates of the value of consumer spending on furniture in the first half of 2009 indicate a fall of 9% compared with the same time in 2008. However, remove the effect of price changes and the volume of spending on furniture is seen to have fallen by 12%.

Forecasters at Oxford Economics expect the value of spending on furniture to have fallen by 4.4% in 2009 overall and to continue declining next year, albeit more slowly, before rebounding with growth of nearly 4% in 2011.

Housing market

The housing market remains in the doldrums. Despite recent house price rises, the figures are based on severely depressed levels. Further, the number of new mortgages approved in August fell for the first time in 10 months, according to the Bank of England. Some analysts issued warnings of another sharp house price fall over the next two years.

The volume of new construction orders in the three months to August was 4% below the previous quarter and down 9% on the year, government officials estimate. At the same time private housing orders fell by 22% year-on-year but public and housing association orders rose 9%. Commercial project orders fell by 44% compared with a year earlier, and industrial orders dropped 46%, but contracts for new infrastructure work were up 46%.

Commenting on the September survey of construction industry purchasing managers, David Noble, chief executive of the Chartered Institute of Purchasing and Supply, said “one of the few glimmers of hope appeared in the housing sector, which registered a marginal rise in activity for the first time in 22 months”.

Reflecting the downturn in construction, UK demand for overseas manufactured builders’ carpentry and joinery fell by an officially estimated 16% between the first half of this year and the same period in 2008. Exports by British makers fell 10%, although the volume of imports exceeded exports by some £184m.

Despite the global recession, trade in wooden container products grew between the first six months of this year and last, with imports up by 21% and exports up by 11%.