Prices charged to British customers by the nation’s wood and wood product manufacturers rose sharply last month, despite survey evidence of weakening pricing power.

The latest official figures reveal that output prices of wood and wood products rose by 8.2% over the 12 months to March, compared with an annual rise of 7.5% the previous month. It contrasts with an overall yearly increase in UK-manufactured product prices of 2.7%, and with a survey by the British Chambers of Commerce in which firms say that pressure to raise prices weakened significantly in the first quarter of the year.

However, the upturn in the timber industry’s prices must be seen against a background of above average material and fuel costs. These rose by 0.4% in March, to a yearly rate of 5.2% – up from 4.6% in February – compared with an economy-wide, crude oil driven annual cost increase of just 0.7%.

At the consumer end of the supply chain retail prices rose by 4.8% overall in March. This could help sway the Bank of England’s decision in May to increase interest rates to 5.5%. Furniture prices jumped from a yearly rise of 3.3% in February, to 8.3% in March following a massive 12.6% increase during the month. The price of DIY materials rose by 3.6% annually, down from 3.9% in February, and were unchanged on February levels.

Last month’s mild weather, which boosted consumer demand for DIY and garden products, is credited in part by the British Retail Consortium for a 5.7% increase in retail sales compared with March 2006. “Bedroom and lounge furniture, sofas and storage were the brighter spots”, in a market which showed the best growth since August last year. Sales of fitted kitchens and bathrooms were slower, after the January promotions and ahead of the expected Easter upturn.

Earlier, the CBI distributive trades survey found that a balance of 18% of furniture and carpet outlets achieved higher volume sales in March than a year earlier, a similar percentage to the previous month, but down from a balance of 49% in January. Among builders’ merchants the balance reporting higher annual demand was 11% – down from 37% in February.

Meanwhile official statisticians estimate that the volume of spending by consumers on furniture and furnishings was up by just 1.2% in 2006, following an annual drop of 2.5% in 2005. In value terms, demand rose by 3.5% last year, from 0.3% the previous year.

But although overall consumer confidence has improved slightly, spending plans for big purchases took a knock in March over continuing worries about debt, taxes, utility prices and the threat of further rises in borrowing costs.

A strong housing market and buoyant commercial property sector have continued to underpin growth in the construction industry. According to a poll by the Royal Institution of Chartered Surveyors workloads are the highest for nearly three years.

However, there are still mixed signals from the housing market about its response to earlier interest rate hikes. Mortgage lender Halifax says that prices rose by just 1% in March, the smallest increase since last summer, but few observers expect a fall in the market which remains under-supplied, and property website Rightmove claims that prices rose by 3.6% to an annual rate of 15%.

On commercial development, a survey by property firm Savills indicates that activity in both the private and public sectors rose strongly in March, to its highest level for three years.

According to data from the Department of Trade & Industry, new construction orders placed in the 12 months to February 2007 were 4% higher than in the previous 12 months in volume terms. But in the three months to February orders eased by 1% compared with the same period a year before.