Despite gloomy reports about trade at the turn of the year from several major high street businesses, furniture group MFI recorded same-store sales up 9% in the three weeks following Boxing Day, and a 4% gain in like-for-like sales.

But the extent to which demand for furniture will be sustained this year is an open question, with the outlook increasingly littered with economic and geopolitical uncertainties. Nonetheless, the latest forecast from the CBI is that total consumer spending will grow 1.9%, after a 3.4% jump last year and before recovering to 2.5% next year.

Economic consultancy Business Strategies forecasts that consumer spending on furniture and floor coverings combined will grow in value by around 3% this year, to £15.4bn, with furniture accounting for about three-quarters of the total. This compares with estimated annual growth of 5% in 2001, and a predicted 5% increase in 2004.

The risks to furniture sales include the slowdown in the housing market and falling consumer confidence. However, the outlook for personal income and employment is relatively robust.

Household spending

Official figures indicate that the value of household spending on furniture slowed to an annual rate of 4% in the third quarter of 2002, from 9% and 5% respectively in the first and second quarters. In the third quarter of 2001 spending was rising by 8% annually. According to official monthly data, the value of furniture retail sales rose 7% in November, to an annual increase of just 1%.

The CBI’s retail survey for pre-Christmas sales indicates that total volumes were flat compared with the same time in 2002 but furniture and carpet retailers achieved strong annual volume growth. A balance of 43% reported year-on-year increases – up from 8% in November, and a fall of 1% in October. In contrast, demand for durable household goods such as electrical appliances plummeted,with 39% of retailers reporting fewer sales than a year earlier.

The British Retail Consortium‘s survey for December – in this case covering the whole of the month – reveals that the three-month trend rate of total retail spending growth fell to 2.5%, from 3.1% in November. However, it asserts that furniture sales picked up only slightly in December.

The average retail price of furniture rose by 1.2% in the year to December, the same rate as in November, but sharply lower than the July rate of 4.1%. The annual increase in the all-items retail price index in November was 2.6%, and 2.9% in December.

Further back in the supply chain, factory gate prices for British-made bedroom, dining and living room furniture for delivery to the home market rose by 0.3% in the 12 months to December 2002, and are at the same level as the average for the whole of last year. Prices of kitchen furniture were unchanged in the year to December – also at the same level as the average for 2002. Manufacturers’ prices of wooden-framed seats rose 0.1% over the year.

The cost of wooden office furniture from British makers was unchanged in the year to December, compared with an annual increase of 1.4% for metal office furniture. Wooden shop furniture prices were up by 0.7% in the year to December.

Mixed fortunes

British manufacturers are seeing mixed fortunes. In the three months to November they increased output of kitchen furniture by just 0.3% compared with a year before, but output of other domestic furniture rose 5.4%.

But total imports of wooden furniture into the UK from EU suppliers rose in value by 28% between the third quarter of last year and a year earlier. In the first nine months of the year furniture imports from the EU rose 25%, kitchen furniture was up 59%, and bedroom furniture increased 29%, office furniture imports fell 13% in value, but other wooden furniture imports were up by a third.

Total UK exports of wooden furniture to EU customers fell 8% in the first nine months of 2002. Kitchen furniture shipments fell 10%, bedroom furniture was down 7%, office furniture fell 1% and other wooden furniture exports dropped 8%. Without an unexpectedly strong economic upturn in Continental Europe, there is little prospect of an improvement in British furniture exports in the foreseeable future.