How is the industry performing?
Input costs unchanged in August
Input costs were up by 5.4% in August compared to that month last year, and unchanged from the July figure. This is the average cost of materials and fuel to furniture manufacturers and according to official figures, cost pressures have eased since January this year when the figure stood at 7.2%.
If we look at imported products used in the manufacture of furniture, the rise in costs is 5.4% in August, the same as general input costs. Comparing the first 8 months of this year with the same period last year, imported product component costs are up by an average of 6.6%.
Official data allows you to isolate costs for certain products that are used in processing by UK furniture manufacturers, although in most cases there is no indication of whether the products are home produced, imported, or both. The data shows that board prices were up by almost 8% in the year to August and veneered sheets by 7%.
BFM's tracker of foam price chemicals shows that in terms of the Euro prices had stabalised since June. BFM's data, shows that OSB costs have risen sharply of late. In just one week at the beginning June, OSB, priced in Sterling, rose by16.6% (source: Brazil FOB). Over the year to the end of July, OSB is up by 9.2%. We understand that the usual furniture grade is in short supply with the manufacturers focusing on the building industry grade.
Factory gate prices increasing
Across all forms of furniture production factory gate prices rose by 3.1% in August compared to prices charged in the same month last year and they are also up on the July figure which stood at 2.8%. Sector performance varies from a fall in prices for office & shop furniture of nearly 1% to a rise in the trade price of wooden upholstered seats of 4.5%.
Highest rise in retail prices for 10 years
There are 2 measures of inflation published for furniture.
The RPI measure of furniture retail prices is based on an average (arithmetic mean) of the goods that make up the index and this shows that the retail price of furniture had increased by 9.7% in August compared to the same month last year. The annual rise to July was 8.6%.
The CPI measure, however, looks at prices in a different way and it is intended to account for price fluctuations such as discounting. At 7%, this shows the largest increase in shop prices since June 2007. This is the eighth consecutive monthly rise.
(Note: The CPI (the government’s preferred measure) looks at the geometric mean and includes furnishings as well as furniture. Here, the ‘root’ of the number of products in the sample is calculated).
The general Consumer Prices Index (CPI) 12-month rate was 2.9% in August 2017, up from 2.6% in July 2017. The All Items Retail Price index by comparison rose by 3.9%, which is significant because although it is not the preferred measure of government, it is still the benchmark index for trade unions in pay negotiations. In fact, last week, certain public sector unions have written to the government asking for a 3.9% rise.