A snapshot of the nation’s furniture industry over the three months to January, provided by a CBI survey, reveals that confidence about the general business was judged to be stronger than three months earlier by 19% of firms, but weaker by 31%. The resulting balance of the 12% who feel pessimistic compares with a situation where the proportion of optimists exactly balanced the pessimists at the corresponding time a year ago.
Reasons for the current downbeat mood are not hard to find. A balance of 52% of firms says they are working below capacity and 31% report order books lower than normal. Half of them expect the volume of deliveries to the domestic market to fall over the coming three months, although some growth in export demand is envisaged.
And those domestic-market customers, as represented by February’s consumer confidence research by GfK NOP, have become sharply less attracted to making major purchases, following an unusually buoyant mood in January. Nonetheless, Oxford Economics believes that consumers’ real disposable income will grow by 2.4% this year, up from 1.3% in 2006.
Domestic sales
The latest official estimates show that the value of domestic furniture and furnishing sales in the third quarter of 2006 was 4.1% higher than a year earlier and rose by nearly 1% on the second-quarter level. In the first three quarters of 2006 sales were some 3% higher than a year before, at £10bn. Without the effect of price changes, the seasonally adjusted volume of spending in the first nine months of last year is estimated to have been 1% higher compared with the corresponding period in 2005.
Government figures on the value of furniture and lighting retail sales in January point to 2% annual growth, down from 4% in December. Total sales last year were 4% higher than in 2005, following a 4% decline the previous year. Without the effect of price changes, year-on-year volume growth is estimated to have been 1% in January – the same rate as in December – and 2% in 2006 overall.
The price of furniture sold to consumers continued its recent volatile behaviour in January. According to official figures it dropped by 13.5% during the month, after soaring by 11.4% in December. At the yearly rate the average retail price of furniture rose by 2.5% in January, down from an increase of 5.3% the previous month.
Manufacturers’ prices
At the factory gate, UK manufacturers’ prices of bedroom, dining- and living-room furniture rose by an average 4.1% in the year to January, while kitchen furniture was lower by just 0.2%. The cost of wooden-framed seats fell by 1.7%, and wooden office furniture was down 1.3%, while wooden shop furniture increased by 2.4% at the annual rate.
Official trade figures reveal that both imports and exports of furniture grew strongly on year-earlier levels in the third quarter of last year. Furniture imports climbed by 11%, while exports expanded by 15%. In the first nine months of 2006 imports and exports increased by 7% and 13% respectively.
The strongest yearly growth in UK demand for overseas-made furniture during the third quarter was for chairs and seats and other office and shop furniture, both up 15%. Kitchen furniture imports were 4% higher and other furniture was up by 8%.
Export sales
Export sales of chairs and seats grew by 21% annually in the third quarter, while office and shop furniture shipments were up 19%. But demand for kitchen furniture produced in the UK fell 7%, while exports of other furniture rose 13%.
Prospects for furniture sales to UK consumers over the period 2007-2011, forecast by Oxford Economics, are for steady yearly growth of around 4% by value, and just over 2% by volume. Detailed forecasts by Market & Business Development suggest that real growth of demand for fitted kitchen furniture will rise by 4% between 2006 and 2011, underpinned by strong sales of self-assembly products.
But the outlook will remain uncertain until the extent of the impending slowdown in housing activity – one of the main drivers of furniture purchases – becomes clearer.
