British manufacturers’ confidence, cash flow, domestic orders, employment and capital investment all improved over the second quarter, but export sales and orders and employment expectations were in retreat. So says a new report from the British Chambers of Commerce, adding that the manufacturing upturn is “very fragile and follows a period of weak confidence and falling output”.
The report, based on a survey of 1,300 manufacturers, also reveals that capacity utilisation has improved marginally and pressure to raise prices has eased slightly.
The latest official data confirms that the recovery in manufacturing output remained on course in May, with growth of 0.9% at the yearly rate. But demand for wood and wood-based products was mixed. Strong annual improvements were recorded for veneer sheets and plywood, and for kitchen furniture, but demand dropped for other furniture, and builders’ carpentry and joinery. Further back in the supply chain, output by sawmilling and planing businesses was flat, as was demand for wooden containers.
Manufacturers’ prices of wood and wood products increased overall by 1.5% in the year to June, but their average cost of raw materials and fuel was 3.8% higher than 12 months earlier. In the high street, consumers had to pay 3.5% more for furniture products in June than a year earlier, following a 3.3% price increase during the month.
Furniture sales
The British Retail Consortium says sales of furniture weakened overall in June, although good weather and widespread promotions strengthened demand for garden furniture. Bedroom and living room furniture did better than kitchens, especially in clearance sales, and fitted furniture remained discount-driven.
In a separate survey, the CBI found that 12% of the nation’s furniture and carpet retailers saw higher sales volumes in June than a year earlier. This was only the second occasion in the last 13 months that the sector has recorded year-on-year sales growth.
Official estimates suggest that the volume of furniture and lighting sales in June was up 6% on the year and in value terms sales were 8% higher. But furniture retailer MFI sank £45m into the red in the six months to June, although profits at its builders’ joinery business rose 5.5%.
The level of unemployment influences consumers’ purchasing decisions, and the figures show that jobless numbers are at their highest for six years, with 1.65 million people classed as unemployed in the three months to May.
The other consideration in consumers’ purchasing decisions is pay and latest data points to cooling growth. Average earnings increased by 4.1% annually in the three months to May – down from 4.4% the previous month.
Housing demand
Nonetheless, housing demand remains strong. Mortgage lending in May was the highest for more than two years according to the British Bankers’ Association, while the Council of Mortgage Lenders reported that lending in May was 30% higher than a year ago and 18% up on April’s figure.
Persimmon, Britain’s largest housebuilder, says the housing market is “satisfactory”, and Taylor Woodrow reports “encouraging signs of recovery” in the UK housing market over the first half of the year, with improved visitor rates and reservations.
On the supply side, the National House Building Council received a total of 18,768 applications to build new homes in May – a 17% increase on the same month last year. Private sector applications were up 22% but housing association applications eased by 6%.
The Department of Trade and Industry estimates that the volume of orders for private housing placed in the three months to May was 3% higher than in the previous three months, but was 9% lower than in the same month in 2005. Construction orders rose overall by 4% compared both with the previous three months and a year earlier.
