Monday 12 August 2024
Early Positive Signs for Construction Product Manufacturing Amidst Long-Term Challenges
The Construction Products Association’s latest State of Trade Survey showed early signs of recovery for the construction product manufacturing sector in the second quarter of 2024. Both heavy side and light side firms reported a quarterly increase in product sales volumes, although concerns remain over the near-term strength of demand and labour availability.
In 2024 Q2, a balance of 30% of heavy side manufacturers reported that sales of construction products increased, marking the first quarterly growth since 2022 Q2. Alongside this, 13% of light side manufacturers reported a rise in product sales.
Despite growth over the quarter, comparisons with a year earlier remained weak, reflecting two years of flatlining GDP growth and an extended period of interest rates being held at peak resulting in a significant reduction in demand from private housing new build and repairs, maintenance and improvement (rm&i). Manufacturers’ expectations for the next 12 months were positive in Q2, with growth expected by both the heavy side and the light side. Nevertheless, the strength of demand continued to register as a concern, whilst a record-high proportion of manufacturers flagged up concern over the availability of labour.
Rebecca Larkin, CPA Head of Construction Research said: “After an extended period of declining sales, particularly on the heavy side, encouragingly we are now seeing the green shoots of recovery. For the heavy side this was the first quarterly growth recorded in two years and given this context, it is perhaps not surprising that sales volumes were still reported lower when comparing to a year earlier given the longer-running weakness experienced by product manufacturers feeding into a slower residential construction sector.
“Whilst cuts in interest rates are expected to be the catalyst for a recovery in the two largest sectors of construction, private housing and private housing rm&i, manufacturers continue to highlight both demand-side and supply-side challenges. In common with construction, one of the industry’s biggest longer-term issues will be attracting and retaining workers.”
Key survey findings include:
• A balance of 30% of heavy side firms and 13% of light side firms reported that construction products sales rose in 2024 Q2 compared with 2024 Q1, the first heavy side growth in two years
• Comparing 2024 Q2 with 2023 Q2, 30% of heavy side manufacturers reported a decrease in sales, on balance
• 56% of heavy side manufacturers and 23% of light side manufacturers anticipated a rise in sales over the next 12 months
• 57% heavy side manufacturers and 49% of light side manufacturers cited ‘demand’ as the key concern for sales over the next 12 months
• 29% of heavy side manufacturers also cited ‘labour availability’ as a concern, the highest proportion on record; this proportion was 27% for light side manufacturers
• All manufacturers reported an increase in wages and salaries compared to a year earlier
ENDS