Sluggish heavy product sales suggest reluctance to invest in new-build projects.
If you want an indication of the state of the construction industry, the performance of the building supplies sector is an excellent ‘weathervane’ – as the recent report from the Construction Products Association (CPA) on the first quarter of 2023 suggests. Given an economic backdrop of virtually zero growth, escalating inflation and a challenging employment market, no one was expecting heavy product sales – such as bricks, concrete, aggregate and so on – to suddenly surge, and those expectations are reinforced by falling heavy side sales for the third quarter in a row. On the other hand, the news is very different for light side sales, which show growth for the eleventh consecutive quarter.
Although the CPA’s economists do point out that extremely wet weather through January and March is likely to have dampened demand for heavy products as work went on hold, the main cause is clearly reluctance to invest in major new-build projects arising from high construction cost inflation and an economy that’s at best static if not actually slowing down. The statistics tend to bear out that analysis, with 7% of heavy side manufacturers saying sales were down, while 44% of light side manufacturers saying sales were still on an upward trend.
The suggestion is that the industry is buying light side supplies in order to focus its energy and investment on infrastructure, energy efficiency retrofits and commercial refurbishments. However, there is a more optimistic interpretation (for heavy side producers at least). Where bad weather has halted major new-build projects outdoors, interior and fit-out work that calls mainly for light side supplies have carried on unhindered – which would explain that upward sales curve.
In conclusion, building supplies may serve as a decent ‘weathervane’ – but they can’t tell you much about the climate. Accordingly, Head of Construction Research at the CPA Rebecca Larkin describes a longer-term outlook that’s mixed but perhaps with scope for improvement:
“In terms of the economy, there was greater stability in Q1 following the post-mini budget turmoil at the end of 2022, which has improved manufacturers’ views for the 12 months ahead. The split in fortunes across construction is likely to continue, however, with housing and other consumer-focused sectors set for a struggle against a backdrop of falling real incomes and interest rate rises, whereas larger-scale refurbishment activity continues to be driven by energy efficiency considerations and new models of hybrid home-office working.”