As autumn approaches, the business climate is also undergoing subtle changes. A raft of positive economic indicators has led employers’ groups to stop calling for more interest rate cuts and instead to try to forestall the next rate rise.

The threat of higher borrowing costs is raised by new evidence that the housing market and consumer spending have been slowing less sharply than the Bank of England had expected. There are even tentative signs of a pick up in manufacturing, albeit accompanied by rising costs, but furniture remains in the doldrums.

Consumer borrowing for house purchases bounced back to £11.6bn in July from £9.7bn in June – the highest since August last year, according to the Council of Mortgage Lenders.

New figures from Halifax indicate that house prices rose 1.3% in August, although the annual rate of increase fell marginally to 19.1%. But a new index compiled by the Financial Times indicates that prices are only up by 4.3% over the year. Meanwhile sellers are gaining the upper hand as the number of houses coming on the market reaches a virtual standstill, says the Royal Institution of Chartered Surveyors, as buyer enquiries rise to the highest level since last September.

Housebuilding grows

New home building expanded in August at the fastest rate since February, reports the Chartered Institute of Purchasing and Supply, the third successive month of growth. Civil engineering also grew robustly in August, to its strongest since November 2002. In the commercial sector, where growth nearly stagnated in April and May, purchasing managers say activity picked up for the fourth consecutive month.

Official figures point to a 6% increase in the total volume of construction in the year to the second quarter. New work rose 7% over the same period, despite a fall in the infrastructure and private industrial sectors, while repair and maintenance rose 5%, with increases in all sectors except public housing.

Consumer spending on DIY equipment and materials shows no sign of abating. The latest Focus Wickes monitor reveals that the average outlay on DIY projects in the four months to the end of June was 35% higher than in the previous four months and 53.5% up on a year before.

The picture is starkly less bright for furniture. The CBI‘s August survey indicates that more than one in three outlets faced a year-on-year decline in sales volumes. The British Retail Consortium reports furniture sales had a difficult time in July.

Retail sales rise

After a buoyant June, total retail sales volumes fell during July’s heatwave, although sales during the three months to July were 1.4% higher than in the previous three months, and up 4.6% on a year earlier.

On the supply side there is news that UK manufacturing may be on the mend. The purchasing managers’ index of business conditions rose in August to 51.9, where 50 marks the divide between growth and contraction. This follows an upwardly revised figure of 51.1 for July and reflects an accelerating expansion of output, backed by strong growth in new orders. Official figures point to a 0.2% increase in manufacturing in the three months to July and a rise of 0.4% compared with the same time last year.

Timber manufacturers related to construction are sharing in the improvement with builders carpentry and joinery output 3.8% higher in the past three months than a year ago, and kitchen furniture up 1.8%. In contrast, output of other furniture fell 6.9%, reflecting lacklustre consumer demand.

But costs and prices were on the move. During August, manufacturers’ raw material and fuel costs jumped 1.5%, taking the annual rate to 2.9% from 2.2% in July. Moreover, factory gates prices firmed to an annual average rate of 1.6% in July, up from 1.4% the previous month.