Sales of domestic furniture are holding up well, strongly ahead of overall growth in household spending. But the market is set to weaken as consumer outlays begin to falter and housing comes off the boil. A protracted slump in the stock market will further undermine consumers’ feel good factor, which is essential for a product whose purchase is frequently deferred in times of economic uncertainty.

Spending on furniture and furnishings grew in volume at a seasonally adjusted annual rate of 6% in the first quarter of this year – compared with 6.8% in the fourth quarter of 2001. Total household spending grew by 3.8% in the year to the first quarter of 2002.

In value terms, which take account of price changes, demand for domestic furniture in the first quarter rose 8.7% year-on-year, following 8.8% growth the previous quarter. The value of household spending as a whole was up 5.7% in the year to the first quarter of 2002.

Sharp slowdown

Official retail sales figures indicate annual increases in the value of furniture purchases in April and May this year of 6-10% respectively. But the CBI‘s survey for June reveals a sharp slowdown, with furniture and carpet retailers reporting no annual volume growth on the month. In May, a third of them saw year-on-year volume increases, and in April more than 50% achieved improved annual sales.

A survey by the British Retail Consortium concludes that June was a “mixed month” for home furnishings. Modern furniture sold better than traditional but there were no signs of large forward orders, and wet weather ensured that it was a poor month for garden furniture.

The retail price of furniture rose by less than 0.1% in June. At the annual rate it rose by 1.5%, down from 3.6% three months earlier, compared with overall inflation of 1%.

On the supply side, factory gate prices for British-made bedroom, dining and living room furniture fell by 0.5% in the year to June, while prices of kitchen furniture fell 0.3%. UK manufacturers’ prices of wooden-framed seats fell 0.8% on the year.

The cost of wooden office furniture fell at an annual rate of 0.6% in June, compared with an increase of 1.4% for metal office furniture. Wooden shop furniture was up 0.3% on a year earlier.

British manufacturers increased their output of chairs and seats by 12% between the three months to May 2002 and the same time a year before; kitchen furniture was up 13%; and other domestic furniture rose 11%. In contrast, office and shop furniture production fell 2% on the year.

Imports of wooden furniture from EC manufacturers rose 7% between the fourth quarters of 2000 and 2001, and by 12% between 2000 and 2001 as a whole, to a total of £376.2m. The value of kitchen furniture imports grew by 3% over the year, bedroom furniture by 13%, and office furniture by 15%. Imports of other wooden furniture from the EU increased 14%.

Wooden furniture exports

The total value of shipments by British manufacturers of wooden furniture to EU countries in 2001 was £158m, up 10% compared with 2000. Sales of kitchen furniture rose by 34%, bedroom furniture by 9%, and office furniture by 36%. Deliveries of other wooden furniture fell marginally.

Looking to the future, the June survey of British consumers carried out for the European Commission by Martin Hamblin GfK, shows that spending intentions eased further during the month. They are now at their weakest since January 1999. The CBI’s latest economic forecast suggests that household spending growth will fall this year to 2.4% in 2002 and 2.1% in 2003, down from 3.9% last year.

The overall spending slowdown is reflected in the forecasts by market analyst Consumer Futures. It predicts that demand for furniture and furnishings will grow in value by 5.6% this year, before dropping to 3.3% in 2003, but will rebound to 5.7% the following year. In 2001 demand had grown by 6.5%. Over the four-year period to 2005, annual growth is expected to average 5.2%.