CPA survey reveals more construction growth but future remains uncertain

Construction industry growth stretched into its thirteenth consecutive quarter in Q2 of 2016 according to the latest State of Trade Survey from the Construction Products Association (CPA). However, manufacturers were downbeat on the prospects for the year ahead, despite three quarters of the survey being completed before the Brexit vote took place.

The CPA survey revealed just over half of heavy side firms and 31% of light side companies said that construction product sales increased in Q2 of 2016 in comparison to the first quarter. The figures are all the more impressive considering it was against the backdrop of uncertainty caused by the EU referendum.

57% of heavy side firms saw sales rise on an annual basis but this was not the case for any light side firms.

13% of heavy side manufacturers expected to see a drop in sales in the third quarter, the lowest balance since the fourth quarter of 2012.

On the light side of the industry, a zero balance was recorded for expectations in Q3, whilst 14% anticipated a decline in product sales over the next year.

In terms of exports, 60% of both heavy and light side firms expected to see a rise in exports over the next year.

According to the survey, 41% of heavy side manufacturers reported annual cost increases and 29% of those on the light side.

Rebecca Larkin, CPA Senior Economist, said:  “Construction product manufacturers’ sales growth strengthened in Q2, suggesting that construction activity remained resilient against a backdrop of growing uncertainty in the run-up to the EU referendum at the end of the quarter.

“Compared to the first quarter of 2016, a balance of 52% of heavy side firms reported a rise in sales in Q2.  This was the highest balance in a year and increased from 31% in Q1.  On the light side, 38% of firms reported a rise in quarterly sales in Q2, up from 13% in Q1.

“However, pessimism prevailed in manufacturers’ views for the months ahead, even with the majority of responses coming in before the existing economic uncertainty intensified following the referendum result.  For heavy side manufacturers, sentiment was the lowest in three years and 13% of those firms anticipated a fall in sales in Q3.  Among manufacturing firms on the light side, forward-looking sales expectations were the weakest since the financial crisis, with a downturn anticipated for the first time in six years.

“Sterling depreciated 8.4% against the Euro in Q2 compared to a year earlier, which may be one favourable side effect linked to the economic uncertainty pre- and post-referendum for product manufacturers that export to Europe.  The majority (60%) of firms on both the heavy and light side anticipate an increase in overseas sales over the coming year.”

 

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