Construction product sales weaken in Q2

But manufacturers cautiously optimistic that sales will continue to grow over next 12 months 

ACTIVITY in the construction products manufacturing sector weakened in the second quarter (Q2) of 2019, with heavy-side manufacturers reporting a fall in sales and a slowdown in hiring during the quarter.

The Construction Products Association’s State of Trade Survey for 2019 Q2 reveals that 6% of heavy-side manufacturers, on balance, reported a fall in sales compared to the first quarter (Q1).

Among light-side manufacturers, a balance of only 9% reported that sales increased. Survey balances for annual growth in product sales were also markedly weaker for all manufacturers.

Looking ahead to the rest of the year, both heavy-side and light-side manufacturers reported that they anticipate sales to increase, although for the heavy side, the balance of 27% was the lowest in two years.

In addition, heavy-side hiring was at a six-year low in Q2, suggesting the industry is adopting a cautious approach as it enters a period with a new Prime Minister and rising uncertainty over Brexit.

Rebecca Larkin, the CPA’s senior economist, said: ‘It is difficult to pinpoint whether the weakness in manufacturers’ sales in Q2 reflects merely an unwinding of the stockpiling by construction firms that occurred in Q1, a more concerning slowdown in the volumes of work on the ground, or a combination of both. Nevertheless, manufacturers have sounded a note of cautious optimism and anticipate that sales will continue to grow over the next 12 months. 

‘However, over two-thirds of firms highlighted demand as the key constraint on future activity and hiring looks to have taken a back seat. Demand in the commercial, industrial factories and housing RM&I sectors has already started the year on a loose footing, meaning there’s a lot resting on the housing and infrastructure sectors to keep construction activity afloat.’

Other key survey findings include:

• On an annual basis, sales increased for 20% of heavy-side and 9% of light-side firms.
• On balance, 20% of heavy-side manufacturers anticipated a rise in sales in the third quarter (Q3) and 27% expected sales to increase over the next 12 months.
• For light-side firms, a balance of 14% anticipated an increase in sales in Q3 and 23% expected a rise over the next 12 months.
• 69% of heavy-side firms and 74% of light-side firms cited demand as the factor most likely to constrain activity over the next year.
• 13% of heavy-side firms reported an increase in their labour force in Q2, the lowest balance since Q3 2013.
• Raw materials costs rose according to 94% of heavy-side manufacturers and 65% of those on the light side.