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Sales of heavy building materials are predicted to slow down, according to the latest trade survey of members of the Construction Products Association.
According to the report, nearly a third of heavyside producers expect sales to fall in the third quarter, with 56% anticipating that sales will fall by up to 5% in the next 12 months, with only 22% expecting an increase.
The CPA warns that the inflationary backdrop – construction product/materials price inflation hit 27.2% in May according to BEIS – is starting to impact decision-making for construction projects as clients, particularly those negotiating fixed price contracts, as well as households considering RM&I work, grapple with rapidly rising project costs.
Rebecca Larkin, CPA Senior Economist said: “In recent quarters, construction product manufacturers have reported escalating inflationary pressures across fuel, energy, raw materials and wages. Added to this, there are early reports that higher costs further down the supply chain for transport, insurance, reverse charge VAT, and the removal of the red diesel rebate are starting to be reflected in lower confidence and delayed decision-making for new construction projects.”
She added: “Demand currently remains strong, particularly in the housing, RM&I, industrial and infrastructure sectors, but the headwinds related to costs are intensifying. Consumer price inflation is yet to peak too, which poses a downside risk if households and businesses rein in spending as disposable incomes and margins are eroded.”
Key survey findings include:
- A balance of 30% of heavy side firms and 17% of light side firms reported that construction products sales rose in Q2 compared with the previous quarter, the eighth consecutive quarter of growth
- Sales balances weakened from 43% (heavy side) and 50% (light side) in Q1
- 30% of heavy side manufacturers anticipate a fall in sales in Q3, whilst 17% of light side firms expect an increase, the lowest balance since the first national lockdown in 2020 Q2
- Costs for fuel, energy, raw materials and wages & salaries rose for all heavy side manufacturers
- Costs are expected to increase over the next year according to balances of 78% on the heavy side and 94% on the light side
- Weaker hiring intentions were reported by both heavy side and light side manufacturers
