The Construction Products Association’s latest State of Trade Survey for 2022 Q4 revealed a quarter of mixed fortunes for the construction product manufacturing industry. Performance was split between a decline in sales for heavy-side producers and continued growth for manufacturers on the light side. Furthermore, manufacturers expect these dynamics to persist in 2023, with new build starts affected by economic uncertainty but refurbishment and activity for energy-efficient retrofit continuing apace.
In 2022 Q4, 20% of heavy-side manufacturers reported that sales of construction products declined, marking a second consecutive quarter of decline. In contrast, 27% of light-side manufacturers reported that product sales rose, which extended a run of growth to ten straight quarters.
In the Q4 survey, demand was viewed as the key constraint on manufacturers’ activity going forward. On balance, one-third of heavy-side firms, whose products tend to feed into the earlier stages of construction, anticipated a decrease in sales over the next 12 months, with two-thirds citing demand as their key concern. On the light side, a balance of 8% of firms anticipated a rise in sales during 2023.
Rebecca Larkin, CPA Head of Construction Research said: “It was a mixed bag for construction product manufacturers at the end of last year, with demand in some areas of construction knocked by renewed economic uncertainty following the Truss government’s Mini Budget, as well as early signs that historically high inflation was stalling household spending and business investment decisions. This primarily affected heavy side manufacturers, who experienced a fall in sales for products that are typically used at the earlier stages of construction as demand and confidence weakened for new build project starts. Sales growth continued for light side manufacturers in Q4, however, and is likely to have been buoyed by areas of construction that are still experiencing strong activity, namely offices refurbishments and energy-efficient retrofit such as insulation measures.”
Key survey findings include:
- A balance of 20% of heavy-side firms reported that construction products sales fell in Q4 compared with Q3, marking a second straight quarter of falling sales
- 27% of light side firms reported product sales rose, the tenth quarter of growth
- One-third of heavy-side manufacturers anticipated a decrease in sales over the next 12 months; 8% of light-side firms anticipated a rise in sales
- Fuel, energy and raw materials costs rose for all heavy-side manufacturers
- Overall costs are expected to increase over the next year according to balances of 69% on the heavy side and 62% on the light side, the lowest balances since mid-2020
Overall, the Q4 survey highlights the varied demand by the construction sector and adds to the signs pointing to a slowdown in activity across new build or sectors that are driven by consumer or business confidence, which will be partially offset by high levels of activity on commercial refurbishment and energy efficiency improvements.
ENDS