The latest news from two of the timber industry’s main end-markets points to contrasting and unsteady patterns of demand. In construction the total output volume in 2000 rose by 1.5% against 1999, and by a similar percentage between the third and fourth quarters of last year. Although the furniture retail trade reports buoyant consumer demand at the beginning of this year, UK production figures indicate a fall of 7.5% between 1999 and 2000 overall, and a marginal decline between the two final quarters of 2000.

The level of orders placed with contractors in the three months to January 2001 improved by 1% on the same time a year ago, but orders for private housing dropped by 18%. Between the same two periods work started on 6% fewer homes, and in the private sector (90% of all housebuilding) new starts dipped by 5%. The total number of completions, which provides an indicator of potential demand for domestic furniture, increased by 1% year-on-year.

Results of the February survey of construction purchasing managers published by BuildOnline and the Chartered Institute of Purchasing and Supply suggest that business conditions in the industry overall improved for the 25th month in succession. However, the rate of expansion eased marginally on the month.

The pace of expansion remained strongest for commercial building projects and slowest in civil engineering, although infrastructure and public sector investments, particularly in healthcare, are expected to help sustain the industry as the economy slows. Activity in housing contracted slightly.

The survey indicates that the average price paid by construction companies for supplies rose sharply in February and increased for the 26th consecutive month. Moreover, the rate of input price inflation picked up for the second successive month to record the strongest monthly increase since last November, as demand continued to outstrip supply. Delivery times also continue to lengthen.

Official price data for January indicates that factory gate costs of builders’ carpentry and joinery rose at an annual rate of 1.3%. Wood and wood product manufacturers’ costs firmed by 1%, but in February they eased to an annual increase of 0.5%.

House prices fell by an average 0.8% in February according to the Nationwide. This followed a large increase in January and takes the year-on-year increase to 8.1% – the smallest since July 1999. Bank of England figures reveal a healthy demand for home purchase loans, with the number approved in January standing at 112,000, compared with a monthly average of 101,000 in the three months to December.

Consumer demand for furniture has been strong since the beginning of the year. The Confederation of British Industry says that more than half of all furniture and carpet retailers saw increased sales volumes during January and February. The pace of growth slowed marginally in February, but business is expected to pick up during March and optimism among retailers has improved.

A survey of retailing by the British Retail Consortium says that furniture orders during the January sales were ‘reasonably strong’. But although February annual sales growth overall is described as the strongest for more than a year, the BRC says furniture business was markedly slower than in January.

However, UK manufacturers’ output of domestic furniture, other than kitchen equipment, declined by 1.1% in the quarter to January and dropped by 6.2% on the same time a year earlier. Kitchen furniture makers suffered less, with a drop of 2% compared with the three months to January a year ago.

Looking ahead, the CBI has trimmed its forecast of household spending growth. It is now expected to ease back from last year’s 3.8%, to 2.5% this year and 2.3% in 2002, with underlying retail price inflation forecast to edge up from 2% at the end of this year to 2.3% by end-2002. Annual output growth in construction is expected to accelerate in volume terms to 3.6% this year and 4.3% next year.
Related Files
Manufacturing output
Wood and wood product, costs & prices
Builders’ carpentry & joinery, wooden container prices
New construction orders
Builders’ joinery and veneer ouput
Wooden furniture output
Furniture costs & prices
Housing starts and completions