Revised estimates which show construction output slumped by nearly 5% mean that economic activity declined more in the first quarter of the year than previously thought, despite a rebound in business investment and a second successive quarterly rise in household spending.
But pollster GfK NOP reports that consumer sentiment unexpectedly rose in May, driven by how people view the economy performing over the next 12 months.
The latest official figures from the high street suggest that total spending volumes in April dropped 1.1% compared with a year earlier. Nonetheless, government statisticians estimate that the volume of furniture sales soared by 11.2% in April, to give an increase of 14.6% over April 2011.
Anecdotal evidence from the British Retail Consortium suggests that furniture and floorcovering sales were helped by the wet weather, which shifted demand back to indoor items after March’s sun. Garden furniture dropped back, while beds and bedroom furniture showed stronger demand. "Promotions and discounts helped, but underlying caution about big-ticket purchases persisted" and demand for fitted kitchens and bathrooms was particularly weak, reports the BRC.
Furniture sales also increased during May, according to a CBI poll, while high street sales overall rose strongly compared with a year earlier, although business was below average for the time of year.
Meanwhile construction companies’ purchasing activity increased, according to the April Markit/CIPS survey of purchasing managers. This reflects improving new order books, although the index of overall activity eased from 56.7 in March, to 55.8 – still well above the 50.0 no-change mark. Home building grew sluggishly in April, but the commercial and civil engineering areas were relatively strong.
Confidence within the industry about the 12-month outlook is comfortably stronger than throughout much of last year, the survey shows, although there has been a widespread loss of optimism since the 2010 deficit reduction measures were announced.
The latest Construction Products Association forecast points to a difficult 18 months ahead. It expects that total output will fall as public sector cuts start to bite, and remain flat in 2013, before private sector commercial, industrial and infrastructure work strengthens and growth returns in 2014. One bright spot in the forecast is the private housing sector, where starts are expected to grow by 5% this year and 11% in 2013.
New home starts registered by the National Housebuilding Council fell 13% in the first quarter of 2012 compared with a year earlier. However, the decline is exaggerated by the registration of the London Olympic village properties in the first quarter of 2011. Private sector starts were up 6% but were overshadowed by a 48% fall in starts of public sector homes.
Other NHBC figures show that timber frame properties accounted for 18% of registrations in Britain in the first quarter of 2012 – slightly above the 17% average for 2011 overall.
