Uncertainty in the property market in the closing months of 2003 helped to create a roller-coaster ride for furniture sales. And 2004 kicks off with the outlook for demand remaining distinctly unsettled.
A survey by the CBI shows that furniture retailers suffered a sharp downturn in December, with a balance of 3% reporting sales volumes lower than 12 months before. This followed two months of relatively healthy demand, with balances of 34% and 27% of furniture outlets reporting year-on-year increases in October and November respectively.
The British Retail Consortium, in its report on December trading, finds that furniture “continued to perform very poorly”, following evidence that sales had improved in November, particularly for beds. It adds that consumer demand in the three months to December drove total high street sales up by 3.2% compared with a year earlier, but down from 4.3% in the three months to November.
Official figures on furniture sales are no longer published, but provisional estimates of sales by household goods stores point to a massive 8.7% rise during the three months to December, although this category includes the booming consumer electronics sector.
Total retail sales volumes expanded by 4% year on year during the period.
Government statistics for the third quarter of 2003 indicate the value of consumer spending on furniture and furnishings was 0.6% lower than at the same time in 2002. This followed annual growth of 2.1% in the second quarter and 2.6% in the first. In the third quarter of 2003 the value of furniture sales was up 22.4% over the year.
Without the effect of retail price changes the picture of consumer spending on furniture is even gloomier, with an annual fall of 2.1% in the third quarter after a steadily declining growth rate of 0.9% in the first quarter and 0.3% in the second.
The outlook shows little sign of immediate improvement. A poll by Martin Hamblin GfK finds that consumer confidence rose marginally in December, but the appetite for major purchases, such as furniture, is at the low levels seen at the end of 2000.
Furthermore, as household finances come under increasing pressure from subdued earnings growth and rising interest rates, spending will inevitably be trimmed. The CBI forecasts that household consumption will grow 2.1% this year, down from 2.5% in 2003, and will fall to 2% in 2005.
Retail analyst Verdict Research warns of a particularly harsh business environment this year. Spending on furniture, and other big-ticket items whose purchase can be deferred without too much pain to the consumer, will be curtailed at least in the early part of the year.
But the outlook for Britain’s manufacturing looks brighter, with export markets beginning to pick up. The British Chambers of Commerce says the number of manufacturers reporting an increase in overseas demand is the highest in four years and the outlook is the strongest since early 1997. Official figures for November show that in the latest three months, output of kitchen furniture was up 1.2% on a year earlier and office and shop furniture was 6.4% higher, but production of chairs and seats was 1.9% lower and other wooden furniture fell 3.1%.
Total UK exports of wooden furniture fell in value by 17% annually in the first half of 2003. Kitchen furniture shipments fell 3% and office furniture was down 9%, but bedroom furniture sales rose 2%. Other furniture exports plunged 22%. Total imports of wooden furniture were 9% higher than a year earlier, although office furniture dropped 15%. Bedroom and kitchen furniture imports were up 14% and 25% respectively, while other furniture imports rose 10%.
The annual rise in the cost of materials and fuels bought by British furniture manufacturers in December was 2%. At the factory gate the price of bedroom, dining and living room furniture for the domestic market rose by 8% in the year to December, and kitchen furniture prices were up 20% higher. Prices of wooden office furniture from British makers fell marginally, but metal office furniture prices rose 4% on the year.
