Demand for domestic furniture is continuing to grow, driven mainly by purchases associated with changing house or setting up home, and by consumers who believe the time is right to spend on major items.

News on the current state of the housing market is confused. Despite some pointers that house price rises are on the wane, especially in London and the south-east, the British Bankers’ Association says mortgage lending fell only slightly in August. And with borrowing costs and unemployment both low – and a good chance that mortgages will get cheaper still – the market is likely to remain strong.

Meanwhile overall confidence among British consumers rose in September, according to research carried out by Martin Hamblin GfK for the European Commission. Around 40% of those quizzed felt now is a good time to make major purchases – sending the “confidence” index to its highest level since January 2002.

Other reports show the pace of growth of consumer spending on furniture and furnishings actually slowing in the second quarter of 2002. But it still rose at a seasonally adjusted annual rate of 3.5% (compared with 5.9% in the first quarter). In value terms, which take account of price changes, official figures show sales of domestic furniture in the second quarter ahead 4.9% year-on-year, as against 8.8% annual growth the previous quarter.

Other official retail sales figures show that the annual increase in the value of furniture purchases in July this year was 2%. The increase in the year to July 2001 had been 5%.

Sales growth slowdown

The CBI‘s retail survey for August indicates a sharp slowdown in sales growth overall, to its weakest for nearly two years. In contrast, furniture and carpet retailers achieved strong annual volume growth. Nearly a third of them reported year-on-year increases – albeit down from 43% in July. Demand for durable household goods such as electrical appliances was even stronger, with more than one in two retailers reporting volumes up in August 2001.

A survey by the British Retail Consortium confirms that August was “an exceptional month for household furniture” with modern furniture producing good sales growth. Laminate flooring is also reported to have enjoyed strong demand.

The average retail price of furniture dropped by 1.5% in August, compared with a fall of 0.4% between the two previous months. At the annual rate prices rose by 4.1% and 2.4% in July and August respectively. This compares with annual increases in the all-items retail price index of 1.5% in July and 1.4% in August, and rises of 1.2% and 0.4% in the price of household goods overall.

The BRC shop price index for August, which covers a range of commonly bought goods, fell by 0.5% during the month but rose 0.6% at the annual rate.

Factory gate prices up

Further back in the pipeline, factory gate prices for British-made bedroom, dining and living room furniture for delivery to the home market rose by 0.3% in the year to August 2002. Prices are now at the same level as the average for the whole of last year, according to estimates by National Statistics.

Prices of kitchen furniture fell by 0.3% in the year to August – at a level slightly lower than the average for 2001. UK manufacturers’ prices of wooden-framed seats fell 0.7% on the year, also to a level marginally below last year’s average.

The cost of wooden office furniture produced by British makers rose at a year-on-year rate of 1.5% in August, compared with an annual increase of 1.4% for metal office furniture. Wooden shop furniture prices were up by an average 0.6% in the year to August.

British manufacturers are seeing significant growth in demand for domestic furniture. They increased output of chairs and seats by 6% between the three months to July 2002 and the same time a year earlier; kitchen furniture was up 8%; and output of other domestic furniture rose 13%. But production of office and shop furniture fell by nearly 4% over the year.