The Construction Products Association’s latest state of trade survey tells the tale of an industry of two halves.
The Mineral Products Association last week reported a 5.2% fall in ready-mixed concrete sales for the second quarter of 2023 and a 3.7% fall in sales of primary aggregates compared to the first quarter.
The Construction Products Association (CPA) survey does not deal in absolute numbers but assesses whether more suppliers are seeing sales rise than fall. In its 2023 Q2 survey a balance of 47% of manufacturers reported that sales of heavy side construction products had fallen, marking the fourth consecutive quarter of decline and the weakest performance since 2020 Q2, mid-pandemic.
In contrast, a net balance of 29% of light side manufacturers reported that product sales had risen, as they have steadily continued to do over the past three years.
Looking to the next 12 months, a balance of 14% of heavy side manufacturers anticipated a fall in sales, while 46% of light side manufacturers anticipated an increase.
The survey also confirms that cost inflation is now abating, with both the heavy side and light side recording the lowest net balances in three years. There was a notable easing in energy costs, while fuel costs were reported to have fallen for the more energy-intensive heavy side producers.
CPA head of construction research Rebecca Larkin said: “The mixed fortunes for heavy side and light side sales growth perfectly illustrates the areas of strength and weakness that are appearing in construction right now. Heavy side sales have no doubt been hindered by the sharp slowdown in new house-building and hold-ups in starting large new build commercial and factories projects. Weak economic growth, two years of rapid cost inflation since projects were first given the go-ahead and uncertainty in the housing market following the Bank of England’s steep path of interest rate rises combine with the declines in new orders in these sectors at the start of the year to constrain demand for the heavy side products that are used for early and structural works. Conversely, interior refurbishments of offices and retail, as well as public sector energy efficiency retrofit, are in full swing and are driving demand for light side products.
“In this quarter’s survey there were clear signs that input cost inflation is slowing, particularly in terms of fuel and energy costs, which should provide some relief for manufacturers who have experienced two years of elevated cost pressures on all fronts. Tellingly, however, around two-thirds of producers – both heavy side and light side – cited demand as the biggest potential constraint on activity this year, highlighting that economic uncertainty remains a dark cloud on the horizon.
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