New figures confirm that January’s cold snap had a big, adverse impact on end markets for timber and wood products: both supply and demand in the housing market came almost to a standstill, while retail sales of furniture and DIY materials took a hit as consumers put off shopping for non-essentials.
The RICS says 20% more of its chartered surveyor members reported a fall than logged a rise in new buyer enquiries in January, down from a balance of 18% seeing an increase in December. The number of newly agreed sales also fell, while the Council of Mortgage Lenders warned of increasingly restricted lending funds.
On building sites, activity continued to decline in January. Housebuilding was the only construction sector to record growth, according to the Purchasing Managers’ survey. The quantity of building materials bought by contractors fell for the 23rd successive month.
Official estimates of orders placed for new home building suggest that in the private sector the number rose 41% in the fourth quarter of 2009, and by 20% compared with the same period a year earlier. Public and housing association orders fell 19% on the quarter, but rose 38% year-on-year.
In trading updates, housebuilder Barratt says it opened 52 sites in the six months to December, and expects completions in the financial year 2010 to be around 12,000 units. Persimmon reports active work at 370 developments in mainland UK, and says the value of forward sales into 2010 is some 40% ahead of last year.
High street sales
New evidence from the high street reveals a poor start to the year, thanks to snowed-in shoppers. The British Retail Consortium says that retailers suffered their worst January for 15 years, with demand for furniture and DIY products among the worst affected. Official estimates indicate that furniture sales volumes dropped nearly 17% in January compared with 12 months earlier, and fell 9.1% in 2009 and as a whole the value of sales slipped by 6.6%.
On the supply side, 29% of British furniture makers polled by the CBI at the beginning of the year expect the volume of new orders to increase over the coming three months, although 6% expect output to fall. Eight per cent of them predict lower output costs, and 25% expect selling prices to fall. Twelve per cent of furniture makers are more confident about the business outlook than they were three months ago; in October 2009 the figure was -7%.
Confidence among wood and wood product producers, apart from furniture manufacturers, is sharply higher than in the autumn, when 32% of firms said they were less optimistic than in the previous quarter; the corresponding figure on optimism now stands at +14%. However, orders and output are expected to remain broadly flat over the next quarter, with both input and output prices forecast to rise.
On the wider economy, consumers face a sharp squeeze on disposable income as earnings rise much slower than inflation, increasing numbers are claiming jobless benefit, and the possibility of a fall in house prices this year and next looms ahead. In the eurozone, the UK’s key export market, survey evidence points to a faltering recovery. Overall, the latest indicators signal a long, hard road ahead for British business and consumers alike.
