As 2001 draws to a close the principal end markets for timber, and for the economy as a whole, are in better shape than might reasonably have been expected in the immediate aftermath of September 11.
The outlook for the UK for next year is brighter than in most other industrialised nations. The US and Japan remain mired in recession, and the eurozone is on the brink of stagnation, yet forecasters who believe the UK is headed for recession are noticeably thin on the ground.
But not all observers endorse the chancellor’s new prediction that growth next year will be only marginally slower than had been expected six months ago. Nor the government’s raising of its earlier forecast for 2003 growth, above trend to 2.75-3.25%.
A new forecast prepared by the CBI comes nearer to the present consensus. It points to economic growth slowing from 2.3% this year, to 1.7% in 2002, before rallying in 2003 to 2.6%. Factory gate price inflation is projected to fall by just 0.1% in 2002 – up from a 0.7% decline this year – and to strengthen further to 1.7% in 2003.
The CBI expects household consumption, which has been the lynch pin of the economy throughout this year, to slow from 3.9% in 2001 to 1.9% next year and bounce back to 2.5% by the end of 2003. Investment in private dwellings will soar by 5.2% next year, it forecasts, compared with a year-on-year drop of 0.6% in 2001, and a further 3.8% increase in 2003.
The latest indicators from the housing market suggest that prices may have peaked temporarily in some parts of the country, although Nationwide says they rose in November, reversing a fall in October. Home mortgage approvals rallied strongly in October to 110,000, an increase of 7,000 on the month.
The fact that people remain sufficiently confident to keep borrowing (consumer credit is rising at an annual rate of 12.9% and mortgage lending at 9.8%) suggests that they will also keep spending sufficiently to ensure that retail sales remain buoyant.
Furthermore, the latest research among UK consumers for the EC by Martin Hamblin GfK shows that confidence improved overall during November. Expectations for the future of personal finances rose by 2 points to +9, the same level as a year ago. The measure relating to the benefits of making major purchases at present rose by 5 points to +18, six points up on the year.
Evidence from the high street, provided by the CBI’s November poll, is that sales rallied overall, with 50% of retailers saying that volumes were up compared with last November. Some 19% of furniture retailers achieved volume growth over the year, contrasted with 32% reporting a yearly drop at the time of the previous month’s survey.
Confirmation of strong demand growth in the approach to Christmas is provided by the British Retail Consortium. It estimates that the year-on-year rise in the value of sales was 5.8% during November, down marginally from 6% the previous month. For furniture, it reports strong sales for large items of household furniture, with modern styles more popular than traditional designs.
On the supply side the year is ending on a less robust note. Purchasing managers in the construction industry say that activity in all sectors was flat during November, having slowed continuously since mid-year. Moreover, the latest survey reveals a marginal decline in total order books for the first time since October 1998.
Survey results from manufacturing indicate that activity has fallen to its lowest level since January 1999, as the industry continues to suffer weakening export demand, and output is expected to fall further over the coming months. Official estimates for forest product industries indicate that although output by sawmills, kitchen furniture and carpentry manufacturers rose in the year to October, sales of sheet materials and wooden containers were down.
The gap between consumption and production seems likely to remain for the foreseeable future. But a two-speed econ-omy is at least better than one that is stationary. However, the odds are that consumers will start to exercise more caution in their borrowing and spending from early 2002, ahead of the expected pick-up in the world economy from the middle of the year.
Related Files
Manufacturing Output
Builders’ Joinery and Veneer Output
Builders’ Carpentry & Joinery, Wooden Container Prices
Wooden Furniture Ouput
Wood & Wood Product, Cost & Prices
Furniture Costs and Prices
Housing Starts and Completions
New Construction Orders
