The latest data presents a fairly bright picture of the timber and timber product industry’s main end-markets. Housing is defying expectations of a sharp slowdown, while consumer demand for furniture is slowly returning towards growth.

Orders for new private housing placed with contractors in the second quarter rose by 11% compared with the same quarter last year, and public sector orders soared by 36%. In other sectors, new infrastructure work shot up by 28%, and public sector non-housing orders rose 9%. Only private commercial and industrial orders were lower than in the second quarter of 2002, down 15% and 13% respectively

The bustle in construction shows up in the Chartered Institute of Purchasing and Supply‘s July report. The index of activity rose to 55.9, where 50 is the dividing line between growth and contraction. In June the index stood at 53.3. Expansion in all the main areas of construction speeded up, with the fastest acceleration in housing.

The CIPS seasonally adjusted index which measures quantities of purchases registered 52.9 in July. This compares with 50.4 in June and is the highest since November. Despite easing slightly, optimism in UK construction firms about the levels of business a year ahead remained buoyant in July.

Housing starts

The National House-Building Council reveals that 43,703 new home starts were registered in the second quarter, a fall of 5% on the same period in 2002. But there was a 14% year-on-year rise in the number of new-build completions in the second quarter.

The average daily sale of new homes in the second quarter of 2003 was 541, compared with 590 a year earlier, according to the NHBC. This downturn may explain, at least in part, the disappointing level of demand for furniture. In an unexpectedly good month for retailers as a whole, the CBI‘s retail survey shows that furniture and carpet sales volumes were 11% lower in July than a year earlier. However, this compares with annual declines of 14% in June and 48% in May.

There was a 6% rise in the value of furniture sales in the year to May, although the figures also include sales of electric lighting. In volume terms this indicates a yearly increase of around 4%. Figures for June point to a 6% rise in total retail sales volumes, with household goods up 7.7%.

Consumer confidence

Consumers’ attitudes to making major purchases improved strongly in July. Martin Hamblin GfK reports that the index of this measure of consumer confidence is now nearly 5% higher than in July last year.

But no sooner had the Bank of England announced its July cut in interest rates than a raft of strong economic indicators was joined by figures on lending. These showed that consumers had piled on record levels of debt in June. Credit shot up by £2.2bn during the month, and total consumer borrowing rocketed by £10bn. Personal debt is now at an all-time high of 120% of disposable income, up from around 90% throughout most of the past decade.

Manufacturing output

Meanwhile figures from the supply side suggest that total UK manufacturing output improved by 3.5% in the year to June. But while output of most timber products rose strongly, sawmilling and planing fell by 8.5% and production of domestic furniture other than for the kitchen dropped 4.9%.

The latest evidence from the CBI is that manufacturers of timber and wooden products, other than of furniture, are downbeat about the business outlook. A balance of 9% is now less optimistic about prospects for the industry than they were three months ago, with just 1% forecasting that the volume of new orders will improve. While 23% expect manufacturing costs to rise during the next three months, only 17% are hopeful of an increase in the price they obtain for domestic deliveries.