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“Widespread Optimism” in construction industry as sales increase in Q2

Construction product manufacturers’ sales increased for a ninth consecutive quarter, driven by growth in all key areas of the UK construction market, together with a rise in export demand, according to the Construction Products Association (CPA).
In the CPA’s latest State of Trade survey, a balance of 78% of heavy side firms and 73% of light side firms reported that sales rose during the second quarter of 2015, compared to a year earlier.

Sales are anticipated to rise over the coming year, with 78% of heavy side firms and 50% of light side firms expecting growth.

The survey also noted a rise in exports, with 20% of heavy side firms and 40% of light side firms reporting an increase.

CPA economist, Rebecca Larkin, said: “The construction recovery has broadened beyond private house building to the commercial, industrial and infrastructure sectors, which has increased demand for construction products and led to a sustained period of growth among manufacturers.

“78% of heavy side firms and 73% of light side firms reported a rise in sales in Q2 compared to a year earlier. In contrast to Q1, which saw a decline in export sales, domestic strength was also boosted by an increase in sales to overseas markets. Manufacturers anticipate that this dual source of rising demand will continue to drive sales over the next 12 months. Reinforcing optimism over the outlook and indicating that manufacturers anticipate a sustained increase in production, two-thirds of heavy side firms reported that investment in plant and equipment increased in Q2 compared to a year earlier and was cited as the primary area of investment for the next 12 months.

“The increase in demand has seen production increase and manufacturers have begun to absorb spare capacity, particularly on the heavy side, where a third of firms reported operating at over 90% capacity in Q2. In turn, increased capacity utilisation has been reflected in manufacturers reporting higher costs.

“Wages and salaries were reported to be higher for 100% of firms on the heavy side and 93% on the light side in Q2, but firms have increased hiring despite the upside pressure on wage bills. 89% of heavy side manufacturers and 47% of those on the light side also increased headcount in Q2.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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