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Product Sales Point to Construction Weakness in Q3

The Construction Product Association’s State of Trade Survey for the third quarter of 2015 indicates construction product manufacturers’ sales increased for a tenth consecutive quarter.
Growth was held back by weakness in exports, but manufacturers continue to be optimistic over prospects for the next 12 months.

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 to 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 over 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.

Rebecca Larkin, CPA Economist, said: “We have now seen ten quarters of sustained growth reported by construction product manufacturers, led by demand from the private housing, industrial and infrastructure sectors.

“On the downside, compared to 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 Q2 and the lowest for the heavy side firms since 2013 Q2. 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, 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.

“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.”

About Fiona Russell-Horne

Fiona Russell-Horne
Group Managing Editor across the BMJ portfolio.

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