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The challenges ahead I
n November, UK manufacturer output, new orders and employment rose the most since August but the supply chain crisis showed little sign of easing. Severe shortages of materials
and staff held back growth and led to escalating input prices, with the rate of cost inflation the fastest since 1992. Haulage costs are up by around 33% compared with last year and courier costs up by 15%.
Employment is strong and back to pre-COVID numbers, but there is a
record 1.1m vacancies. Retail sales volumes increased by 0.8% YoY in October, but there are still positives for our sector: consumer demand remains good for home-related products, with Kingfisher in DIY, M&S in homewares and AO in electricals all producing decent trading updates. UK house prices continue to surge but house moves fell by 52% in
October as the Stamp Duty holiday ended. Approvals for new house purchases are still tracking ahead of pre-pandemic, but growth is falling.
Retail Sales Retail sales volumes rose by 0.8% in October from a flat position between August and September; volumes were 5.8% higher than pre- COVID (Feb 2020). Non-food stores was the only main retail sector that saw a rise in sales volumes, increasing by 4.2% in October. The proportion of retail sales online fell to 27.3% in October, its lowest level since March 2020 (22.5%), but still substantially higher than the 19.7% in February 2020 before the pandemic.
Gross Domestic Product (GDP) Gross domestic product (GDP) is estimated to have grown by 0.6% in September but remains 0.6% below its pre-COVID level (Feb 2020). Output in consumer-facing services fell by 0.6% mainly because of a 13.3% fall in the wholesale and retail trade. Consumer-facing services are 5.5% below their pre-coronavirus pandemic levels, while all other services are now 1.0% above. Production output decreased by 0.4% in September
Purchasing Managers Index The UK Manufacturing PMI increased to 58.2 in November, pointing to the strongest growth in factory activity in 3 months. Output, new orders and employment rose the most since August but the supply chain crisis showed little sign of easing. Severe shortages of materials and staff held back growth and led to escalating input prices, with the rate of cost inflation the fastest since the survey began in 1992. Export sales decreased. Manufacturers noted that long lead times and Brexit trade frictions had held back sales to customers in the EU.
Mortgage Approvals The number of mortgage approvals for house purchase in the UK decreased to 72,600 in September, from 74,200 in the previous month. This was the lowest since July 2020, but remained above pre-pandemic levels.
The UK economic picture is becoming much more challenging but there are still many positives for home enhancement suppliers. As we wrap up 2021 and look ahead to the year ahead, leading UK trade association BHETA shares an economic snapshot with Housewares readers.
House Moves The temporary residential Stamp Duty holiday ended at the end of September which, as expected, caused the number of housing transactions to halve month on month: there were 76,930 UK residential transactions in October 2021, 28% lower than October 2020 and 52% lower than September 2021.
Commodity prices The World Bank reports that natural gas and coal prices reached record highs in 2021 although they are expected to decline in 2022. Crude oil prices averaged $70 in 2021, up 70%; the price is projected to reach $74 a barrel in 2022 as demand strengthens. As global growth softens and supply disruptions are resolved, metal prices are forecast to fall 5% in 2022, after rising by an estimated 48% in 2021. Timber prices experienced rapid increases in May, June and July, up by 55%, 65% and 88% versus 2020. Encouragingly, the Timber Trade Federation says that is ‘highly likely’ there is now enough timber in the country with imports 8% up on pre-Covid levels.
Consumer Price Index
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 3.8% in the 12 months to October 2021. Many categories in our sector had price changes well over average: building materials +13.6%; coffee machines & tea makers +10.8%; hand tools +10.0%, garden products +9.2%, irons +8.0%, garden furniture +5.6%, cleaning equipment +5.1%. Some were lower than the average: kitchen utensils +3.7%, glassware and tableware +2.5%, cutlery -1.5% and table linen -0.1%.
Labour Market The labour market continues to recover. The number of payroll employees is back to pre-pandemic levels. Latest Government Labour Force estimates for June to August 2021 show the employment rate increased by 0.5%-points, to 75.3%. and the unemployment rate decreased by 0.4%-points, to 4.5%. The economic inactivity rate is down 0.2%-points to 21.1%. The number of job vacancies in July to September 2021 was a record high of 1,102,000.
November/December 2021
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