Despite a modest increase in confidence about the economy among British consumers, fewer think this is a good time to make major purchases such as furniture, according to a new survey by pollsters by GfK NOP.

Uncertainty over the strength of any recovery, and rising unemployment, which are combining to make shoppers wary of splashing out on big ticket items, are reflected in the latest official figures on retail furniture sales. Although volumes in May were 4% higher than in April, they were 11% lower than in the same month a year ago. In value terms, sales rose 5% in April but fell 11% at the yearly rate.

In contrast, a CBI survey of furniture and carpet retailers for the first two weeks of June found the first year-on-year increase in sales volumes for 18 months. The figure for July will be eagerly awaited to determine whether the rebound marked the start of an upward trend or was only a temporary blip.

Consumer spending

Newly published consumer spending data from the Office for National Statistics for the first quarter of 2009 give no indication of an impending revival in demand for furniture. Data adjusted for seasonal variations and for price changes reveal that outlays on furniture and furnishings fell 4% during the quarter and were 15% lower than in the first three months of last year. At current, unadjusted prices, the value of spending fell 15% on the quarter and was 12% lower than at the same time in 2008.

Separately released figures on overseas trade in furniture show that total shipments by British manufacturers fell by 4% in the first quarter of 2009, and dropped 15% compared with the same period last year, with falls for both domestic and office furniture.

UK imports of furniture were worse affected by the downturn in demand, seeing an overall fall of 9% during the first quarter and a 20% drop compared with a year earlier. Office and shop furniture was the worst affected, with imports down 29% annually.

Imports of other wood and wood products fell 6% in the first quarter, and were 27% lower than at the same time last year, with timber and sheet products suffering particularly badly. But despite the fall in construction activity, UK imports of builders’ carpentry and joinery eased by only 14% at the annual rate.

Overseas markets

Overseas markets for British wood and wood products other than furniture were broadly unchanged during the first quarter, but declined 15% compared with the first quarter of 2008. Exports of builders’ carpentry and joinery suffered most, with a 27% year-on-year fall.

UK construction activity fell in June after some improvement in May, the CIPS/Markit purchasing managers’ index indicates. The downturn worsened at an increasing pace in the housing and commercial construction sectors and, in line with lower activity levels, purchasing also continued to decline in June.

The fragility of construction is highlighted by official figures on new orders. In the three months to May the total volume was down 1% compared with the previous three-month period and fell 30% compared with the same period in 2008. Private housing orders dropped by 37% annually.

Construction prospects

Prospects for the construction industry have worsened, according to the Construction Products Association. It has downgraded its forecast for construction output to a record fall of 16% in 2009, and a further fall of 5% next year, with a 20% drop in the number of homes built this year compared with last.

Nonetheless, the housing market does show signs of beginning to stabilise. Property price falls are easing and the Home Builders Federation reports that May saw the largest annual rise in net reservations on new homes for three years. Further, the Bank of England says lending for home buying rose in the three months to June for the first time since the third quarter of 2007.