The construction products manufacturing sector expanded for a fifth consecutive quarter in 2021 Q3, according to the latest Construction Products Association’s State of Trade Survey. This is despite escalating cost pressures and ongoing issues on the supply side that have been further exacerbated by a shortage of HGV drivers and disruption at major ports.
In Q3, a balance of 44% of heavy side manufacturers reported that sales had increased compared to Q2, whilst on the light side, 26% reported an increase. Both balances fell from those recorded in the previous quarter, however. Given a strong pipeline of new work in private housing, private housing repair, maintenance and improvement (rm&i) and infrastructure, 56% of heavy side and nearly two-thirds of light side manufacturers anticipate further sales growth over the next 12 months.
The third quarter data, however, showed that cost pressures intensified and broadened from raw materials to fuel, energy and wages & salaries, owing to the recent rise in global gas, electricity and crude oil prices, as well as a shortage of both skilled and unskilled labour. Given the strength of demand for construction products and materials, capacity utilisation also increased in the year to Q3, particularly on the heavy side.
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Amandeep Bahra, CPA Economist said, “Despite challenging trading conditions stemming Covid-19 and Brexit, construction product manufacturers achieved a fifth consecutive quarterly rise in product sales in Q3. More encouragingly, manufacturers remained optimistic about sales growth over the next 12 months. However, the recent surge in global energy and commodity prices have pushed up energy and fuel costs for manufacturers. All firms surveyed reported an annual increase in fuel costs, whilst the balance citing higher energy costs hit a four-year high for energy-intensive heavy side manufacturers and a nine-year high for light side manufacturers. This comes as raw materials and wages & salaries continue to put upward pressure on input costs and with a record high proportion of heavy side firms operating at over 90% capacity, cost pressures are unlikely to abate any time soon, especially, as the full impact of rising energy prices is yet to be felt.”
Key survey findings include:
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