Construction sales slow in Q4

Published:  26 January, 2016

Sales of construction products slowed in the fourth quarter of 2015, but optimism still remains for the future, according to the Construction Products Association (CPA).

The CPA's latest State of Trade Survey attributes this slowdown in sales growth to domestic weakness and a fall in export sales. Nevertheless, sales achieved their 11th consecutive quarter of growth and were still significantly higher on an annual basis.

Manufacturers also remain optimistic about domestic and overseas prospects for 2016.

According to the survey, 5% of heavyside firms and 38% of lightside firms reported that sales rose during Q4 2015, compared to 13% and 29% respectively in Q3. Some 29% of heavyside firms, and 23% of lightside firms, reported an annual increase in sales. Exports decreased for 9% of heavyside firms and 20% of lightside firms, compared with a year earlier.

Almost half of all product manufacturers (43% heavyside and 42% lightside anticipate a rise in total sales over the next 12 months, with 10% of heavyside and 29% of lightside firms also expecting a rise in exports during 2016.

Fourteen percent of heavyside firms and 8% of lightside firms reported an increase in costs in Q4. While decreases in fuel, energy and exchange rate costs were seen, wages and salaries were reported higher for 90% of heavyside firms and 77% of lightside firms.

Rebecca Larkin, CPA senior economist, said: "This marked the eleventh straight quarter of rising sales of construction products. For manufacturers on the heavy side, however, this was the lowest quarterly balance in three years, which echoes weakness in overall construction output data for the closing months of last year.

"Compared to Q3, only 5% of heavyside firms reported a rise in sales in Q4. This was the lowest balance since Q1 2013 and reflects lower domestic activity, as well as a decrease in export sales as Sterling appreciated against the Euro in late 2015. On the lightside, where products are typically used towards the end of the construction process, 38% of firms reported a rise in Q4 quarterly sales, indicating continued demand from strong building activity earlier in 2015.

"A positive effect of the Q4 appreciation in the Sterling was its downward impact on manufacturers' import costs. The decline in global oil prices also filtered through into lower fuel and energy costs, meaning that a balance of only 14% of heavyside manufacturers and 8% of lightside firms reported an increase in costs in Q4. Wages and salaries remained the standout inflationary pressure, however, as shortages of skilled labour pushed up wage bills.

"Encouragingly, both heavyside and lightside product manufacturers displayed optimism for the year ahead. Product sales will increase during 2016, driven by renewed growth in international sales and domestic activity, led by the private housing, offices and infrastructure sectors in particular. We forecast output growth of 5%, 7% and 7.9% respectively in these sectors in 2016."

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