Although consumer spending slowed abruptly at the beginning of the year, and the near term looks tough for retailers and manufacturers alike, demand is expected to stage a modest recovery in the next year or so.

For furniture sales, which are traditionally driven by activity in the housing and office markets, the shorter term prospects look brighter. New construction orders are up in both sectors and there are signs that buyers have been returning to the market in increasing numbers since Easter.

Figures indicate that the value of consumer spending on furniture slowed to an annual rate of 2.3% in the fourth quarter of 2002, from 4.7% and 3% respectively in the second and third quarters. In the first quarter of last year outlays were rising at an annual rate of 8.6%. The value of demand for furniture in 2002 as a whole was up 4.5% compared with 2001.

Strip out the effect of retail price changes and seasonal variations, and spending rose last year at an annual rate of 2.6%, compared with 5.3% in 2001. In the fourth quarter of 2002 expenditure was 1.6% higher than in the third, and 1.1% up on the same time in 2001.

Household spending

The value of household spending in total rose last year by 4.4%, but by just 1.2% between the two final quarters. In volume terms, spending in 2002 was up 3.9% overall, and by 1% between the third and fourth quarters.

Consumer spending slowed sharply at the beginning of this year. In particular, retail sales volumes rose by only 0.1% in the first quarter – the weakest rate for more than four years. Estimates of the value of furniture sales suggest a year-on-year decline of 4% in January, followed by a 3% upturn in February.

However, the latest retail survey by the CBI indicates that furniture sales volumes fell annually for a balance of around one in five retailers in both February and March, and was broadly unchanged in the year to March. Meanwhile demand for durable household goods such as electrical appliances dropped for 23% of retailers, and was flat in the year to April.

The British Retail Consortium survey for April shows that the three-month trend rate of total retail spending growth rose slightly to 4.4%, from 4.3% in March. It describes April as a mixed month for furniture, with big-ticket items “showing signs of slowing”.

Retail prices

The average high street price of furniture rose by 1.2% in the year to April, down from 2.4% in March, and sharply lower than the April 2002 rate of 2.7%. The annual increase in the all-items retail price index in April was 3.1%, unchanged on the previous month.

The typical factory gate price of UK-made bedroom, dining and living room furniture for the home market rose by 0.6% in the 12 months to March 2003, and kitchen furniture was up 1.2%. Manufacturers’ prices of wood-framed seats rose by 2% over the year. The price of UK-made wood office furniture rose at an annual rate of 0.2% in March and metal office furniture prices rose 3%.

Further back in the pipeline, the cost of materials and fuels bought by furniture manufacturers rose at an average annual rate of 1.6% in March, up from 1.2% in February.

Once again British manufacturers are experiencing mixed fortunes in terms of output, although the overall picture is gloomy. In the three months to March output of kitchen furniture was 1.1% lower than a year before, chairs and seats were down 4.5%, and other domestic furniture dropped by 9.4%. Output of office and shop furniture fell by 5.2%.

Export figures

The overseas trade figures tell an even more dismal story. Total imports of wooden furniture into the UK last year rose in value by 14%, while exports plummeted by 17%. Imports of kitchen, bedroom, and other furniture rose by 34%, 23% and 17% respectively. The corresponding figures for exports show declines of 17%, 22% and 14%.