The Chartered Institute of Purchasing and Supply reports that its purchasing managers’ index (PMI) covering manufacturing jumped from 46.5 in January to 50.1 in February. For the first time in 12 months the index was above the 50 dividing line which separates expansion from contraction. However, an international trade war which spirals out of control, as has been predicted by some analysts, could play havoc with hopes of a continued recovery in manufacturing.
Meanwhile the PMI for services rose at its strongest rate since last June, to signal a sharp turnaround from the falling levels of activity in the final four months of last year.
Of more immediate consequence to suppliers of timber and related products, the PMI for the construction industry picked up again last month to hit the highest level since July 2001. The index rose to 55.4 in February, from 54 in January, and has now been above the 50 mark for 37 consecutive months. Activity rose throughout the industry but housing retained its lead over commercial and civil engineering projects.
However, shortages of supplies of some materials, evidenced by increased delivery times, are adding to mounting pressure on contractors’ costs, according to the survey. Official estimates show that wood and timber product producers’ material and fuel costs rose 0.4% in February, but were 0.1% lower than 12 months earlier. At the factory gate, prices were 0.3% lower than in January, also down by 0.1% on a year before.
Although the number of new domestic properties started in the quarter to January increased by 8% compared with 12 months earlier, the number of new homes built in 2001 fell to its lowest peacetime level since 1924. Just 162,000 houses and flats were completed, 4% fewer than in the previous year.
The continuing imbalance between supply and demand – blamed by housebuilders on lengthy delays in the planning system, accompanied by a fall in interest rates to a 38-year low – is reflected in the almost relentless rise in property prices. Halifax says that prices leapt by 16.9% in the year to January. Immediately prior to the terrorist attacks in September prices were rising at an annual rate of 10.9%.
Analysts expect the housing market to slow later this year as consumers begin to react to reduced levels of earnings, an expected rise in taxes in April’s Budget, and the prospect that the next interest rate change will be upward.
Figures from the CBI suggest that manufacturing-sector pay settlements are already slowing. In the three months to January they averaged 2.3% – down from 2.9% in the three months to December, and the lowest rate at any time since the data was first collected in 1980. Government sources indicate that average annual earnings in manufacturing slowed from 3.7% in the three months to November, to 3% in December.
During last year as a whole, however, consumer spending grew by 6.3% compared with a year earlier at current prices, and by 4.6% in real terms. The latest survey conducted by Martin Hamblin GfK for the EC, indicates that expectations among British consumers about personal finances remain at one of the highest levels in recent years.
Nonetheless, there is evidence that the consumer spending boom is beginning to run out of steam. The CBI reports that retail sales growth slowed for the second month in a row in February. Expansion was weaker than the rates seen last summer and in the run-up to Christmas, although a slight acceleration is expected during March and growth is described as ‘holding up reasonably well’.
The survey shows that stores selling furniture and other household durables recorded significant year-on-year sales growth, but DIY stores were among those with the weakest growth compared with a year ago. The monthly report from the British Retail Consortium confirms that furniture continued to show solid growth, with modern designs reported to be more popular than traditional.
Related Files
Manufacturing Output
Builders’ Joinery and Veneer Output
Builders’ Carpentry & Joinery Wooden Container Prices
Wooden Furniture Output
Wood & Wood Product, Cost & Prices
Furniture Costs and Prices
Housing Starts and Completions
New Construction Orders