Construction Manufacturers Expect Strong Final Quarter of 2018

Construction manufacturing resumed usual output in Q3 2018 after weather-related pauses and subsequent catch-up’s affected the first half of the year.

The latest State of Trade Survey, by the Construction Products Association, reveals that product sales increased in 2018 Q3. For heavy side manufacturers, 27% reported that sales increased, which was below the 40% that reported a rise in sales in a weather-boosted Q2. Manufacturers of insulation, boilers, glass and lighting, (the light side), reported that sales rose by 27%, marking the first increase of 2018.

Growth is anticipated to continue into Q4, with 18% of heavy side firms and 43% of those on the light side expecting an increase in sales during the quarter. Manufacturers also reported that labour cost pressures began to subside in Q3. Two-thirds of heavy side firms reported an increase in wages and salaries. In contrast, cost inflation for fuel and raw materials remained high.

Strong Final Quarter Expected for 2018

Rebecca Larkin, CPA Senior Economist said: “Given the unprecedented levels of economic uncertainty around Brexit and the weather-related distortions in the first half of the year, signs of a steady expansion in Q3 for construction product manufacturing, and the building activity it delivers into, are reassuring. Manufacturers remain cautiously optimistic and expect sales to increase in the fourth quarter, but it will be the political developments in Q4 that are crucial in setting the backdrop for this to become a reality.

“Cost pressures appear to have started easing on the labour side, but with continued weakness in Sterling and the upward march in global oil prices since May, manufacturers are still feeling the pinch when it comes to fuel and raw materials input costs.”

Key survey findings include:

• A balance of 27% of heavy side firms and 27% if light side firms reported that construction product sales rose in the third quarter of 2018 compared with the second quarter.
• On an annual basis, sales also increased for 27% of heavy side and light side firms
• On balance, 18% of heavy side manufacturers anticipated a rise in sales in the next quarter, decreasing from a balance of 50% in the previous quarter
• On the light side, 43% of firms expected an increase in product sales in Q4, compared to a zero balance in Q1 and Q2
• Overall annual cost increases were reported by 64% of manufacturers on the heavy side and 50% on the light side
• Raw materials costs rose according to 82% of heavy side manufacturers and 71% of those on the light side
• Fuel costs were reported higher by 90% of heavy side and light side firms