Optimism over construction product sales

08 October, 2015

Sales point to construction weakness in Q3 but manufacturers remain optimistic for year ahead

THE Construction Products Association’s State of Trade Survey for the third quarter (Q3) of 2015 indicates construction product manufacturers’ sales increased for a tenth consecutive quarter. Although growth was held back by weakness in exports, manufacturers continue to be optimistic over prospects for the next 12 months.

Key points include:

A balance of 27% of heavy-side firms and 67% of light-side firms reported that sales rose during the third quarter of 2015, compared with a year earlier
Exports decreased for 18% of heavy-side firms and rose for 14% of light-side firms
64% of heavy-side product manufacturers and 79% of light-side product manufacturers reported that they anticipate a rise in total sales over the coming year
27% of heavy-side firms and 36% of light-side firms anticipate a rise in exports over the next year
40% of heavy-side firms and 33% of light-side firms reported operating at more than 90% capacity over the last 12 months
77% of heavy-side firms and 33% of light-side firms increased investment in plant and equipment in Q3
53% of heavy-side firms and 33% of light-side firms anticipate increasing employment over the next 12 months.

Construction Products Association economist Rebecca Larkin said: ‘We have now seen 10 quarters of sustained growth reported by construction product manufacturers, led by demand from the private housing, industrial and infrastructure sectors.

‘On the downside, compared with a year earlier, 27% of heavy-side firms and 67% of light-side firms reported a rise in sales in Q3. These balances were lower than those reported in the second quarter and the lowest for heavy-side firms since the second quarter of 2013.

‘This decline largely reflects a decrease in export sales experienced by heavy-side manufacturers as Sterling has continued to appreciate against the Euro throughout late 2015; however, the fact that heavy-side product sales occur at the beginning of the building process may also foretell a slowdown in domestic construction activity.

‘Despite this, construction product manufacturers retain a positive outlook for the next 12 months. Most survey respondents – 64% of heavy-side manufacturers and 79% of those on the light side – anticipate that product sales will increase over the next year, with expectations of renewed growth in international sales combining with rising demand from the domestic market.’

Ms Larkin continued: ‘As firms increase production, a growing proportion of manufacturers reported operating at 90% capacity or above in Q3. In response, manufacturers reported increased investment in plant and equipment, as well as their labour force. A further increase in investment and hiring intentions for the next 12 months signals widespread confidence over the longer-term outlook.’