CPA survey reveals positive outlook for the construction products industry

708

The Construction Products Association’s State of Trade Survey for 2018 Q2 shows that the £56bn UK construction products industry is making up for activity lost during the adverse weather conditions in the first three months of the year

Construction product sales act as an early indicator of wider activity in the supply chain and these results signal a rise in total construction output levels over the next 12 months.

Heavy side manufacturers reported an increase in activity, with sales in Q2 rising for 40% of firms, following two previous quarters of falling sales. For light side manufacturers, 29% of firms on balance reported a decrease, which was the weakest performance since 2012 Q3. This imitates the delayed impact of the industry’s decline in Q1, as light side products such as insulation, boilers, glass and lighting tend to be used at the end of the building process.

Manufacturers anticipate a return to growth in the impending quarters, with 43% of heavy side firms and 27% of those on the light side expecting an increase in sales over the next 12 months. Input cost inflation continues to persist, however, particularly for the energy-intensive heavy side, which is experiencing the pass-through of rising global commodity prices on fuel and energy costs.

Rebecca Larkin, CPA Senior Economist said: “These results fit the profile of construction catch-up from a weather-affected Q1. As we’ve moved from a freezing Spring to a hot Summer, groundworks and work on external structures has been able to resume, and this has been reflected in increased sales for heavy side manufacturers. The disruption in Q1 is likely to have delayed interiors and finishing works starting on site which is evident in the decline in light side sales during Q2.

“Manufacturers’ product sales, capacity utilisation and new hiring are all still expected to increase over the next year, but price pressure is coming from all directions across fuel, energy, raw materials and labour, which is likely to be felt throughout the construction supply chain.”

Key State of Trade Survey findings include:

  • A balance of 40% of heavy side firms reported that construction product sales rose in the second quarter of 2018 compared with the first quarter. 29% of light side firms, on balance, reported a fall in sales in Q2.
  • On an annual basis, sales increased by 20% for heavy side firms and 12% for firms on the light side, on balance
  • On balance, 43% of heavy side manufacturers anticipated a rise in sales in the next year, increasing from a balance of 37% in the previous quarter
  • On the light side, 27% of firms expected an increase in product sales in the next year, compared to a balance of 16% in 2018 Q1
  • 27% of heavy side firms increased headcount in the past year, the lowest balance in nearly five years
  • Annual cost increases were reported by 73% of manufacturers on the heavy side and 50% on the light side
  • Raw materials costs rose according to 87% of heavy side manufacturers and 88% of those on the light side.

LEAVE A REPLY

Please enter your comment!
Please enter your name here