UK optimism despite slowdown

A slowdown in the growth in sales of construction products in the UK for the fourth quarter of 2015 has been recorded, but as it was an 11^th consecutive quarter of growth, manufacturers are maintaining their optimism.

The UK’s Construction Products Association’s latest State of Trade Survey said the slowdown in growth in sales of construction products in the fourth quarter of 2015 was a result of domestic weakness and a fall in export sales.

Sales nonetheless achieved their 11^th consecutive quarter of growth and were still significantly higher on an annual basis, it said, adding that manufacturers also remained optimistic about domestic and overseas prospects for 2016.

A balance of 5% of heavy side firms and 38% of light side firms reported that sales had risen during the fourth quarter of 2015, compared to balances of 13% for heavy side and 29% for light side in the third quarter.

The survey said 29% of heavy side firms and 23% of light side firms reported an annual increase in sales. However, exports decreased for 9% of heavy side firms and 20% of light side firms compared to a year earlier.

Looking ahead, 43% of heavy side product manufacturers and 42% of light side product manufacturers reported that they expected a rise in total sales over the next 12 months, while 10% of heavy side firms and 29% of light side firms forecast a rise in exports during 2016.

Rebecca Larkin, senior economist at the association, said, “This marked the 11th straight quarter of rising sales of construction products. For manufacturers on the heavy side, however, this was the lowest quarterly balance in three years, which echoes weakness in overall construction output data for the closing months of last year.

“Compared to the third quarter, only 5% of heavy side firms reported a rise in sales in the fourth quarter.”

She said this was the lowest balance since the first quarter of 2013, and reflected lower domestic activity, as well as a decrease in export sales as Sterling appreciated against the Euro in late 2015.

“A positive effect of the fourth quarter appreciation in the Sterling was its downward impact on manufacturers’ import costs,” she said. “The decline in global oil prices also filtered through into lower fuel and energy costs, meaning that a balance of only 14% of heavy side manufacturers and 8% of light side firms reported an increase in costs in the fourth quarter.

“Encouragingly, both heavy side and light side product manufacturers displayed optimism over the outlook for the year ahead.”

She said the expectation that product sales would increase during 2016 was driven by renewed growth in international sales and domestic activity, led by the private housing, offices and infrastructure sectors in particular.

She added that the Construction Products Association forecast output growth of 5.0% for private housing, 7.0% for offices, and 7.9% for infrastructure in 2016.