Heavyside may be slightly subdued.
Building products sales rise
Published: 05 October, 2010
UK: Sales of construction products rose during the third quarter of 2010, according to the Construction Products Association.
But the buoyancy of the past six months is relative to the depressed state of the industry during 2009 when private sector demand contracted at an unprecedented rate and the current, even cautious optimism, is unsustainable in the longer-term CPA said.
Noble Francis, economics director of the CPA added: "Sales of both heavyside products, typically used in the early stages of the construction process, and lightside products, such as paints, heating and lighting products, were strong relative to 2009 Q3.
"From a level of 66 in 2010 Q2, the lightside sales index climbed to 73, its highest level in three years and 54% of lightside respondents reported that sales volumes were higher than in the same quarter 12 months ago.
"The heavyside sales index stood at 79 for the second consecutive quarter and a significant 71% of respondents reported that their sales rose."
Expectations about the future are more subdued, particularly for heavyside, he said.
From a peak of 81 in 2010 Q2, the expected heavyside sales index fell to 50, suggesting that sales volumes are anticipated to plateau in Q4.
Lightside respondents, however, continue to be optimistic about their sales over the short-term and the lightside expected sales index stood at 63, its highest level since the first quarter of 2008, for the second consecutive month.
Survey respondents warned that a sustained recovery is unlikely beyond 2010 and expressed concern about the pending Comprehensive Spending Review on 20 October.
Dominic McAra, director of the Ernst & Young's Construction Products team that complied the report, stated: "The summer's optimism reflected a period when a number of companies in the sector achieved better than expected results – although these expectations may have been low based on a tough 2009.
"Many companies have managed to generate cashflows during the last two years despite lower profits, as a result of reduced capital expenditure and maximising working capital.
"At some point, this may cease to be sustainable without a longer-term impact on business, but it may not be until beyond the winter period that there is confidence to invest. This dilemma will leave companies with a difficult balancing act between their shorter-term and longer-term needs," he said.