Following the easing of lockdown restrictions and the subsequent reopening of construction sites and supply chains, construction product manufacturers reported a rebound in the third quarter of 2020, pointing to early signs of a V-shaped recovery.
The Construction Products Association’s (CPA’s) State of Trade Survey for 2020 Q3 reports that one-third of heavy side manufacturers reported a rise in sales compared to Q2. Sales of lightside products were reported to have increased by 48% of manufacturers. Mirroring Office for National Statistics data on construction output during the quarter, product sales remained lower compared to a year earlier.
It was a more mixed picture for manufacturers’ forward-looking expectations, however. Both heavyside and lightside manufacturers expect the recovery to intensify in Q4, with 56% of all firms anticipating a rise in sales in the next quarter, on balance. However, when looking to the next 12 months, 24% of heavyside anticipated a fall in sales, contrasting with 21% of lightside manufacturers anticipating a rise. Reflecting the uncertainty over the outlook for construction in 2021, negative balances remain for manufacturers’ investment intentions in new structures, plant, and machinery, whilst adjustments to newer working practices mean that investment in e-business remains a priority.
Rebecca Larkin, senior economist at the CPA, said: “Despite the welcome news of a pickup in activity, the Q3 survey captures the uncertainty over the recovery path for the economy and construction next year.
“There are already clear signs of differences in the outlook by sector, with housebuilding subject to volatility as the stamp duty holiday ends and employment backdrop worsens, infrastructure benefiting from new and ongoing major projects, and commercial facing near-term unknowns over demand for office and retail space, depending on how embedded homeworking becomes in future. The uncertainty is proving to be a catalyst for manufacturers to prepare for how new ways of working may change supply chain distribution, notably through increasing investment in developing e-commerce.”
Key survey findings include:
- Thirty-three percent of heavyside firms and 48% of lightside firms reported that construction products sales rose in Q3, compared with the previous quarter, improving from the weakest balances in nearly 12 years.
- On balance, 56% of both heavyside and lightside manufacturers anticipated a rise in sales over the next three months.
- Half of heavyside firms anticipated a decline in sales over the next 12 months, according to a balance of 24%.
- Twenty-one percent of lightside manufacturers anticipated sales increasing over the next year.
- On the heavyside, 6% of firms expected to reduce investment in structures over the next 12 months, and 24% expected to reduce investment in plant/equipment.
- Sixty-five percent of heavyside firms and 43% of lightside firms, on balance, also anticipated increased investment in e-business over the next year.