The more optimistic view emphasises that when consumer spending slows down – as it inevitably will – it will be from a point where there is a strong momentum. Even the most downbeat of city forecasts now expects the UK economy will grow by around 1.5% this year, although the governor of the Bank of England warns it is too soon to judge if the country can avoid a recession.
If the Gulf war is any guide, consumers in the event of hostilities spend relatively more on food and drink and less on furniture, appliances and cars. But some feel consumer anxiety this time could, alternatively, see an increase in people staying at home and wanting to improve their domestic surroundings. And that would underpin demand for furniture and furnishings.
The latest official data on consumer expenditure on furniture indicates an annual volume increase of only 0.6% in the first quarter of this year – down from 2.1% the previous quarter. This compares with growth in total household spending of 3.3% between the first quarters of 2001 and last year. Allowing for price changes, the value of furniture purchased in the first quarter of this year increased by 1.9% year-on-year, while total spending was up 4.8%. In the second quarter of 2001, household spending grew at an annual rate of 3.7% by volume and 5.4% in value.
Retail surveys by the Confederation of British Industry suggest demand for furniture was weak during the second quarter, with an average of 6% of respondents reporting lower volume sales than a year earlier. Promotional offers in August put some life back into the market and 27% of retailers achieved volume growth over the 12 month period.
Promotional offers
The British Retail Consortium says that July was a good month for furniture overall, helped by strong promotional offers. But for August it notes that, although the retail picture was patchy, ‘Furniture enjoyed a fantastic summer sale…and shoppers picked up some real bargains.’
According to National Statistics, furniture prices in the high street increased at an annual rate of 1.5% in August – up from 1% in July but sharply down from June’s 2.6%.
Manufacturers’ factory gate prices for kitchen furniture have been steady, at a level 1.6% higher than a year earlier, since the beginning of 2001. Bedroom, dining and living room furniture prices have been on a broadly downward trend since the beginning of the year and in August were 0.4% higher than 12 months before. Wooden-framed seat prices are now 0.1% lower than a year ago; wooden office furniture is 1.7% more expensive; wooden shop furniture is up 3% on the year; and mattress supports are 0.1% higher than in August 2000. But the average cost of furniture manufacturers’ materials and fuel purchases in August was 0.5% lower than a year before.
As British manufacturing overall slowed down further, figures for actual furniture production were mixed. In the year to July, total output of kitchen furniture for home and overseas markets grew 4.6%, but chairs and seats fell 1.4%, office and shop furniture fell 0.8%, and other furniture fell 1.3%.
Overseas trade
The overseas trade situation is equally mixed. In the first quarter of 2001, shipments to EC countries amounted to £42.7m, a rise of 5% compared with the same time in 2000. Sales of wooden office furniture increased by 18% on the year, while kitchen furniture exports were up 26%. Deliveries of bedroom and other wooden furniture fell 9% and 1% respectively.
In contrast, imports of wooden furniture from EC countries during the first quarter of 2001 leapt by 27% compared with a year earlier, to £94.4m. The value of wooden office furniture imports rose 53%, kitchen furniture by 10%, and bedroom furniture by 43%. Imports of other wooden furniture from the EC increased by 15%.
Related Files
Retail Sales
Retail Prices
UK Manufacturers’ Prices