Slowdown and inflation threaten construction product industry

Published:  03 April, 2012

UK/EUROPE: The Construction Products Association's latest State of Trade Survey, shows that although a Eurozone crisis appears to have been averted for the time being, the prospect of an economic slowdown in the major European economies, together with increasing global energy and raw material prices, remain as the major threats to further recovery in the UK construction products industry.

Commenting on the figures, Construction Products Association senior economist, Kelly Forrest said: "It is encouraging that sales rose in the first quarter, but manufacturers also highlighted the key factors that threaten growth throughout 2012 and into 2013, these factors include the continuing uncertainty within the euro zone, and significant concern regarding rising costs, especially fuel costs.

"With more than 75% of construction products exports being absorbed into the European market, recent forecasts from the OECD indicating a slowdown in key Eurozone countries, such as Germany and France, potentially threaten prospects of further growth for product manufacturers.

"Construction product manufacturers have also been hit hard by rises in fuel prices. More than 90%, on balance, experienced fuel price inflation in Q1. Oil prices recently reached $125 a barrel, their highest level in almost four years and the full effects of this will be felt throughout 2012.'

Other key points include:

* At +7%, the heavyside sales balance entered positive territory for the first time in three quarters.

* 36% of heavyside firms anticipate that sales will increase over the next year.

* Lightside firms are equally optimistic, with 34% anticipating sales growth in the next 12 months.

* 74% of heavyside firms and 50% of lightside firms expect unit costs to rise in the next 12 months.

* Only 10% of heavyside firms and 20% of lightside firms operated at over 90% capacity in Q1.

* 80% of heavyside firms and 62% of lightside firms cited demand as the factor most likely to constrain activity going forward.

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