A two-year period of sales growth in construction products ended in the third quarter of this year, amid a deteriorating economic backdrop.
That’s according to a new Construction Products Association (CPA) survey of product manufacturers. It noted a slowdown in construction activity in the publicly financed repair and maintenance sectors since the summer. It said manufacturers were expecting a contraction in sales for the year ahead.
In Q3, 12% of heavy-side manufacturers reported that sales of construction products declined. That marked the first fall since the nationwide lockdowns in Q2 2020. Alongside this, 17% of light-side manufacturers reported that product sales rose, which was the lowest balance in two years.
Demand ‘key constraint’ on activity
Meanwhile, fuel costs rose for all heavy-side and light-side manufacturers. Energy costs increased for 94% of heavy-side and 96% of light-side firms.
Manufacturers told the survey that demand was the key constraint on manufacturers’ activity. On balance, 53% of heavy-side firms, whose products tend to feed into the earlier stages of construction, anticipated a decrease in sales over the next 12 months. On the light side, a balance of 13% of firms anticipated a decline. That marked the first negative view since the height of Covid-19 disruption in 2020.
Rebecca Larkin, CPA senior economist said: “High inflation continues to erode household finances and take big chunks out of project budgets, at a time when markets have reacted badly to the new chancellor’s early fiscal plans and knocked confidence and growth prospects even further.”
She added: “With a recession on the cards for 2023, it should come as no surprise that construction product manufacturers are anticipating a contraction in sales and activity. This combines with the strong rates of input cost inflation that already pervade the supply chain and have begun to delay decision-making on construction projects.
“Hopefully some of the unanswered questions around the government’s spending plans will be resolved in the coming months and help to lift the cloud of uncertainty hanging over our industry.”
