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News » UK » Growth in construction product sales starts to slow » published 25 Jan 2016

Growth in construction product sales starts to slow

Sales of construction products have now been rising for 11 consecutive quarter, but the growth rate has now begun to slow down.

The Construction Product Association’s latest state of trade survey reports a slowdown in growth for the fourth quarter of 2015 but finds manufacturers still optimistic for 2016. 

A positive balance of 5% of heavy side firms and 38% of light side firms reported that sales rose during the fourth quarter of 2015, compared to respective balances of 13% and 29% in the third quarter.

Some 29% of heavy side firms and 23% of light side firms reported an annual increase in sales, while 43% of heavy side product manufacturers and 42% of light side product manufacturers reported that they anticipate a rise in sales over the next 12 months.

Manufacturers reported a decrease in fuel, energy and exchange rate costs, but wages and salaries were reported higher for 90% of heavy side firms and 77% of light side firms.

CPA senior economist Rebecca Larkin said:  “This marked the 11th straight quarter of rising sales of construction products.  For manufacturers on the heavy side, however, this was the lowest quarterly balance in three years, which echoes weakness in overall construction output data for the closing months of last year.  

“Compared to Q3, only 5% of heavy side firms reported a rise in sales in Q4.  This was the lowest balance since 2013 Q1 and reflects lower domestic activity, as well as a decrease in export sales as Sterling appreciated against the Euro in late 2015.  On the light side, where products are typically used towards the end of the construction process, 38% of firms reported a rise in Q4 quarterly sales, indicating continued demand from strong building activity earlier in 2015.

“A positive effect of the Q4 appreciation in the sterling was its downward impact on manufacturers’ import costs.  The decline in global oil prices also filtered through into lower fuel and energy costs, meaning that a balance of only 14% of heavy side manufacturers and 8% of light side firms reported an increase in costs in Q4.  Wages and salaries remained the standout inflationary pressure, however, as shortages of skilled labour pushed up wage bills.

“Encouragingly, both heavy side and light side product manufacturers displayed optimism over the outlook for the year ahead.  A balance of 43% of heavy side firms and 42% of those on the light side anticipated that product sales will increase during 2016, driven by renewed growth in international sales and domestic activity, led by the private housing, offices and infrastructure sectors in particular.  We forecast output growth of 5.0%, 7.0% and 7.9%, respectively in these sectors in 2016.”

 

 

MPU

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This article was published on 25 Jan 2016 (last updated on 25 Jan 2016).

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