Demand for wood and wood products remains mixed. Sawmilling output achieved a healthy 4% growth in the latest quarter compared with a year earlier, but veneer sheet production was down by nearly 15%. Builders’ carpentry output dropped by 9%, and kitchen and other domestic furniture fell by 6% and 3% respectively.
The overall fall in economic activity in the wood and wood product industry, as measured by added value, is set to abate steadily over the next three years and lead to marginal annual growth in 2009. That’s the view of Oxford Economic Forecasting, which sees the 2005 decline of 4% reducing to 1.3% this year, and to 0.3% in 2007. The strongest annual growth in 2006 is forecast to be in the south-west (up 8.7%), and the weakest in the north-east (down 7.5%).
But employment in the sector is expected to fall by 2.5% this year, and to continue falling by an average annual rate of 3.1% over the period 2007-2009. The only region expected to see higher job numbers this year is the south-west, with 7.6% more employees working in timber industries than in 2005.
Figures on the UK labour market indicate a further overall weakening. The number of unemployment benefit claims increased by 14,000 in February, the largest monthly rise since December 1992, and the employment rate among people of working age fell to 74.5% in the three months to January, from 74.7% in the previous quarter.
These data should allay concerns about inflationary pressure, but put at risk consumer confidence – which had already edged lower in February.
The pick-up in household outlays in the second half of last year may already be slowing, with evidence that the underlying growth in retail sales is losing strength. In the three months to February total volume growth slowed to 0.5% on the previous three months, compared with 1.3% growth in the three months to January.
Total sales of household goods, unadjusted for seasonal variations, were 3.8% higher in the latest three months than at the same time a year earlier. On the same basis of comparison sales of furniture were down by nearly 5%, while in value terms sales dipped by 4%.
The British Retail Consortium says that the shop price of furniture fell 1.1% in February, with discounting and promotional offers still in evidence but “not as prolific as in January”.
The latest on house prices, mortgage approvals, and buyer enquiries, underpinned by optimistic comments from housebuilders after weathering months of declining sales, clearly points to a revival in the market.
Growth in UK construction activity picked up in February according to the nation’s purchasing managers, with new contracts and new business leads helping to fuel a 22-month high in business confidence. Furthermore, the Chartered Institute of Purchasing and Supply’s housing sector activity index rose to 52.9 – exceeding the critical no-change value of 50.0 for the first time since last September.
Growth in the index of activity in commercial construction projects has also continued, and the overall new order index has hit the highest reading since last November. Mirroring the trend of new orders, buying of construction products and materials rose at an increased pace in February.
