Despite a contraction in economic growth in the fourth quarter of last year, factory output from furniture and other wood product manufacturers was up strongly as 2010 drew to a close. But the major UK end markets for timber products face strong headwinds in the short term, and good times look some way off.
Figures suggest that production of furniture expanded by 6.7% in the year to November, while timber and timber products output grew by 5%. The manufacturing upturn was widespread; the factory Purchasing Managers’ Index (PMI) hit a 16-year high in December, with strong new-order intake from both domestic and overseas markets.
Furniture sales
Official data on furniture sales in the fourth quarter of 2010 reveal an 8.3% annual fall by value, and a 10.1% annual drop in volumes after adjustment for price changes. The volume of sales fell 5.1% between November and December, while values tumbled by 4.2%. The British Retail Consortium says that new product ranges, promotions, and pre-Christmas delivery promises helped some furniture retailers, but “fitted kitchens, bathrooms and bedrooms were mixed and often discount-driven”.
New data on household spending on furniture and furnishings in the third quarter of last year point to a seasonally adjusted year-on-year fall of 2.5% in volume terms.
Overseas trade in furniture shows a healthy increase in exports – up 19% annually in the third quarter of 2010. Exports of other wood products fell 4%, with builders’ carpentry and joinery demand down 31%.
Poor weather slowed building activity in December for the first time in nine months, according to the construction PMI. Only the commercial sector saw a rise during the month, but the increase was the slowest in the current nine months of growth. The fall in the residential sector was the fastest since April 2009.
Construction firms say purchasing activity fell for the third consecutive month in December, accompanied by longer lead times from suppliers and the fastest rise in input prices in seven months. Nonetheless, the industry remains optimistic about future business.
Construction output
Government statisticians report total construction output fell by nearly 1% in the three months to November compared with the previous three months. New work fell by 0.5% and repair and maintenance fell by 1%. The biggest decline was in new infrastructure work. Output of new public housing grew 3% while private housing expanded by 2%.
The level of completed house sales stabilised at the end of 2010, although the outlook for the property market remains mixed, according to the latest RICS survey. But surveyors’ expectations for sales over the coming months have edged up, and many respondents believe the market will begin to pick up in the spring.
In the broader economy, inflation is fuelling concern. The consumer prices index jumped by 3.7% in the year to December – up from 3.3% the previous month – to an eight-month high. The alternative, retail prices index, which includes housing, is at 4.7%, the highest since July 2010.
So far high inflation is squeezing consumers’ budgets rather than forcing up wages, but the Bank of England’s reluctance to raise interest rates, for fear of stalling recovery, seems unlikely to hold indefinitely.
