No Brexit blues for construction product manufacturers
Despite reports of a construction industry slowdown before and after the EU referendum, sales of building products appear to have continued growing unabated.
The latest Construction Products Association (CPA) state of trade survey reports continued growth in sales in the third quarter of 2016. Sales have now increased for 14 consecutive quarters.
In the first survey after the EU referendum, manufacturers moved from a pessimistic stance to an optimistic one regarding near-term prospects.
However, they have yet to benefit from the weak pound with any increase in exports.
CPA senior economist Rebecca Larkin said: “Construction product manufacturers reported an increase in sales during Q3, suggesting that construction activity remained resilient following initial uncertainty in the run-up to, and immediately after, the EU referendum in June.”
‘Balance’ means the percentage reporting positively minus the percentage reporting negatively.
She continued: “A balance of 26% of heavy side firms reported a quarter-on-quarter rise in sales in Q3, although this was lower than the balance of 52% recorded in Q2. Quarterly sales rose according to half of manufacturers on the light side, which was the highest balance since 2015 Q1 and an increase from 38% in Q2.
“In contrast to pre-referendum pessimism evident in manufacturers’ forward-looking views in last quarter’s survey, expectations for near-term sales turned markedly higher in Q3. On balance, 45% of heavy side firms and 67% of those on the light side anticipated rising sales over the next three months and this optimism extends for performance over the next 12 months.
“Interestingly, the sharp depreciation in sterling does not appear to have translated into an increase in export sales in our sector. Instead, the effect of the weak currency has been manifested in rising costs for imported raw materials and higher fuel bills, adding to the existing inflationary pressures on wages created by skills shortages. Nevertheless, manufacturers anticipated a pickup in overseas sales over the next 12 months.”
Key survey findings include:
• A balance of 26% of heavy side firms and 50% of light side firms reported that construction product sales rose in the third quarter of 2016 compared with Q2
• On an annual basis, sales rose for 68% of heavy side firms and 60% of firms on the light side, on balance
• On balance, 45% of heavy side manufacturers anticipated a rise in sales in Q4, improving from a balance of -13% in Q2
• On the light side, 67% of firms expected an increase in product sales in the next quarter, compared to a zero balance in Q2
• 42% of heavy side firms and 40% of light side firms anticipated an increase in export sales over the next year
• Annual cost increases were reported by 57% of heavy side manufacturers and 56% of those on the light side.
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This article was published on 10 Oct 2016 (last updated on 10 Oct 2016).