The respected National Institute of Economic and Social Research concludes that UK growth in the three months ending in October was no stronger than in the third quarter – that the economy was in effect still flat on its back. This was despite signs of stabilisation in the housing market, a jump in manufacturing output, and improving consumer confidence.
Pessimism among timber and wood product manufacturers about business prospects deepened in the past three months, according to a CBI survey. A balance of 32% of firms said the business situation has worsened in the quarter to October, compared with 16% in a July poll.
The survey shows that the volume of new orders continued to contract in the three months to October, albeit at a slower rate, with a balance of 23% reporting a fall, and a similar percentage expecting a drop in the next three months. Output also fell for a balance of 23% of survey respondents in the last quarter, and 40% forecast a drop in the coming three months. A continued squeeze on margins is signalled by 21% of manufacturers who expect input costs to rise over the next three months, and 9% who foresee a drop in selling prices.
Furniture manufacturing
Business sentiment among furniture manufacturers has worsened from +8% in July to -7% in the latest CBI survey. This partly reflects a deterioration in the new order intake on the last three months (-2%) and an expectation of lower order volumes in the next three months (-7%). However, the volume of output is expected to remain broadly unchanged over the coming quarter. Although a balance of 23% of furniture makers expect factory gate prices on the domestic market to fall, unit manufacturing costs look set to stabilise.
Encouraging news on consumer demand for furniture has come from retailers surveyed by the CBI in October: a balance of 57% of outlets reported a year-on-year increase in sales volumes, compared with 3% who experienced a decline in September, and 47% who suffered an annual decline in August.
Sales in the retail sector as a whole also rose during October, according to the survey, and confidence increased to its highest level since 2007. A positive balance of 19% of retailers polled expects sales to expand in November, encouraged by the impending VAT rise.
Purchasing survey
The October survey of construction industry purchasing managers found that although residential sector activity grew for the second month in a row, the industry worsened overall as the pace of contraction accelerated for the second successive month. With activity levels falling, purchasing of materials declined – at its fastest rate for four months.
House prices continued to rise in October, according to a RICS survey, as the slowly increasing supply of property remains insufficient to keep pace with stronger demand. This points to further price gains in the near future.
The volume of orders for new construction placed in the 12 months to September dropped 22% compared with the previous 12 months, while private housing orders fell by 44%. Orders for commercial projects were down 49% and industrial construction orders fell by 42%. Infrastructure orders rose by 37%.
In the wider picture, new growth forecasts from the Bank of England were notably stronger than in those published in August. GDP is now expected to rise by around 4% annually by 2011.
