The Construction Products Association’s latest state of trade survey indicates that product manufacturers suffered from a slowdown in sales and exports in Q3 with problems for the sector were made worse by rises in cost inflation.

Although the first months of 2012 gave rise to optimism for the year, this has now been revealed as misplaced. Product manufacturers have now endured two consecutive challenging quarters and the construction environment appears to be deteriorating, they say.

Commenting on the figures, Construction Products Association economics director Noble Francis said: “Both heavy and light side manufacturers endured a fall in sales during the third quarter. Light side manufacturers had until recently enjoyed growth in export sales, offsetting the impacts of falls in domestic demand. Yet, export sales fell during the third quarter, adversely affected by euro zone uncertainty and global economic slowdown.

“As a result, both heavy and light side manufacturers reported that they had reduced employment during the third quarter and, furthermore, with the construction sector anticipated to fall sharply over the next 18 months, it is unsurprising that product manufacturers reported they anticipated that employment would fall further in the next year.”

Key points include:

•          20% of heavy side firms and 41% of light side firms reported that sales fell between Q2 and Q3.

•          35% of heavy side manufacturers and 12% of light side manufacturers, on balance, reduced employment in the year to Q3.

•          15% of heavy side manufacturers and 6% of light side manufacturers, on balance, anticipate that employment will fall further over the next 12 months

•          50% of heavy side manufacturers and 29% of light side firms stated that costs had risen in the third quarter compared to a year ago.

There is hope that Q4 will pick up. Heavy side manufacturing firms reported that the second and third quarters of the year appear to have been adversely affected the consistent poor weather, Jubilee bank holiday and Olympics/Paralympics. These are temporary factors and point towards why product manufacturers are more positive regarding sales for Q4. However, demand from stronger overseas markets, which had offered many manufacturers an essential lifeline, has slowed considerably as euro zone uncertainty has returned and the previously fast-growing BRIC economies.

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