Construction product makers recorded an eighth consecutive quarter of sales growth in the three months to June but the rise was the slowest since the current run began following lockdowns in the second quarter of 2020.
The balance of firms reporting growth in the Construction Product Association’s (CPA) latest survey fell to 30 per cent for heavy manufacturing companies and 17 per cent for light firms, from 43 per cent and 50 per cent, respectively, in the first quarter.
Companies in the sector were also downbeat about its prospects as customers’ budgets are placed under pressure due to rising inflation.
Building materials prices are outpacing inflation, increasing by 27.2 per cent in the year to May, according to the Department for Business, Energy & Industrial Strategy. They are expected to rise further, with 78 per cent of heavy manufacturers and 94 per cent of light firms indicating they expect costs to continue increasing.
“In recent quarters, construction product manufacturers have reported escalating inflationary pressures across fuel, energy, raw materials and wages,” said CPA senior economist Rebecca Larkin.
“Added to this, there are early reports that higher costs further down the supply chain for transport, insurance, reverse charge VAT, and the removal of the red diesel rebate are starting to be reflected in lower confidence and delayed decision-making for new construction projects.”
In May, the CPA forecast that growth in the construction sector would slow to 2.8 per cent this year from 12.7 per cent in 2021 as inflation saps demand, particularly in the repair, maintenance and improvement (RMI) market.
Earlier this month, broker Shore Capital said Marshalls' (MSLH) shares would be hit by weaker RMI demand as it makes up about 20 per cent of group sales. A prolonged RMI recession "may also impact Howden (HWDN) and Travis Perkins (TPK)", it added.
Marshalls said last week its first half sales were likely to be 37 per cent higher following its acquisition of roof tile maker Marley.
