According to a CBI poll, the August heatwave was a turn-off for most shoppers and led to a sharp slowdown in sales growth, with only 12% of retailers reporting higher volumes than 12 months earlier. But among furniture outlets a massive 36% reported lower volumes than a year before. And the picture had been dismal throughout the summer. In May, nearly one in every two furniture traders surveyed reported an annual decline, and volumes continued to fall throughout June and July.
The British Retail Consortium survey for July reported furniture and floor coverings continuing to have a difficult time, although there was some improvement on June. In August, the BRC says, fewer customers visited stores and, apart from beds, furniture had “a tougher time”.
But in contrast to survey results, official figures suggest that sales of furniture and lighting rose in value by 6% in the year to July, after rising by 6% and 7% respectively in May and June.
Spending value up
According to other official statistics, the value of consumer spending on furniture and furnishings slowed to an annual growth rate of 2% in the first quarter of 2003, from 3.1% and 2.4% respectively in the third and fourth quarters of last year. In the first quarter of 2002 outlays of furniture were soaring at an annual rate of 8.7%.
Remove the effect of retail price changes and seasonal variations, and spending on furniture and furnishings rose last year at an annual rate of 2.7%. In the third and fourth quarters expenditure was 0.8% and 1.1% higher respectively than a year earlier, but by the first quarter of 2003 annual growth had shrunk to just 0.2%.
Today, despite still strong employment figures, consumers are suffering the pressure of higher national insurance contributions and council taxes, while average earnings growth, at around 3% per year, remains muted. A consumer poll by Martin Hamblin GfK found that confidence stumbled in August, for the first time since March. Expectations of future personal finances were also eroded, while the perceived benefits of making a major purchase weakened.
Worrying outlook
With the traditionally strong link between home buying and the purchase of household furnishings apparently severed, at least in the present economic climate, the immediate outlook for furniture sales is worrying for retailers and UK manufacturers alike.
The growth of wooden furniture imports is also a cause for concern for the nation’s manufacturers. The total value of wooden furniture imports from the EU in the first quarter of the year was 11.3% higher than a year earlier. The value of bedroom furniture imports from the EU rose by 16.4% between the first quarters of 2002 and of 2003, but kitchen furniture imports dropped 16.6%. Wooden office furniture imports rose 2.8%.
In contrast, total exports of wooden furniture to the EU dropped by 14.9% annually in the first quarter of the year. Kitchen furniture shipments plunged 52.8% and office furniture exports were down 6.8%, but bedroom furniture sales rose 7.7%.
Meanwhile, the high street price of furniture in the UK rose by 2% in the year to August, up from 1.3% in July. The average factory gate price of UK-made bedroom, dining and living room furniture for the domestic market rose by 4.8% in the 12 months to August 2003, and kitchen furniture prices were 12.7% higher than a year earlier. Prices of wooden office furniture from UK makers increased by just 0.4% annually in August, but metal office furniture prices rose 3.5%.
Manufacturers’ costs
Further back in the price pipeline, the cost of materials and fuels bought by furniture manufacturers increased at an average annual rate of 1.8% in August, up from 1.7% in July.
The question now facing UK furniture makers, as a stumbling recovery in the global economy begins to get under way, is whether a potential rise in export demand can be tapped to make up for slowing demand in the home market.