Construction Product Manufacturing Begins to Feel the Headwinds
Author: Ross Sturley, CIMCIG
The construction products manufacturing sector began to feel the impacts of the broader weakness in economic growth and a diminishing pipeline of construction activity in Q3, with heavy side manufacturers reporting a fall in sales and a slowdown in hiring during the quarter.
The Construction Products Association’s State of Trade Survey for 2019 Q3 reports that 3% of heavy side manufacturers, on balance, reported a fall in sales compared to Q2. Sales of light side products, typically used in the later stages of construction, were reported to have increased by a balance of 54% of manufacturers, however.
Looking ahead, manufacturers are signalling a cautious view for the next 12 months that encompass Brexit and the rising likelihood of a general election. 11% of heavy side firms anticipated a fall in sales for the year ahead, which was the survey’s first negative reading in the forward-looking indicator in seven years. This was combined with a subdued picture for hiring in Q3, in addition to expectations that rises in headcount over the next year will be the lowest since 2013.
Rebecca Larkin, CPA Senior Economist said: “Third quarter performance was mixed across heavy side and light side product manufacturers, which serves to illustrate the varying fortunes across construction at the moment. The level of construction work underway is currently relatively high, which is benefiting light side product manufacturers feeding into large-scale city centre regeneration underway, particularly in Birmingham and Manchester. However, the fall in sales and forward-looking indicators for the heavy side, which is typically linked to the early structural elements of a building, highlights the upcoming gap in the pipeline of new construction orders and project starts, notably in the residential and commercial sectors and in southern regions of the country.”
Key survey findings include:
- On balance, 3% of heavy side product manufacturers reported that sales fell in the third quarter of 2019 compared with the second quarter. A balance of 54% of light side manufacturers reported a rise in sales.
- On an annual basis, sales decreased for 11% of heavy side firms but rose for 28% of light side firms.
- On balance, 20% of heavy side manufacturers anticipated a fall in sales in Q4 and 11% expected sales to increase over the next 12 months.
- For light side firms, a balance of 30% anticipated an increase in sales in Q4 and 31% expected a rise over the next 12 months.
- Only 3% of heavy side firms reported an increase in their labour force in Q3, the lowest balance since 2013 Q3.
- Demand was cited as the factor most likely to constrain output over the next year, according to 60% of heavy side respondents and 56% of those on the light side.