Construction product sales show signs of life

The sale of construction products has continued to decline in Q4, although the rate of decline has slowed considerably compared to the previous quarter, according to the latest Construction Activity Barometer from Ernst and Young and the Construction Products Association (CPA).

In the Barometer a figure of 50 represents no change in sales compared to a year earlier with below 50 representing a fall in sales. This quarter’s overall results of 29 still indicates that the majority of product manufacturers continue to be affected by the falls in construction. However, the value is significantly higher than the unprecedented historic low of 0 recorded in the first half of this year and somewhat higher than the figure of 12 reported last quarter.

Commenting on the results, Noble Francis, Economics Director for the CPA said; “This latest figure of 29 is a marked improvement on the figures seen in Q2 and Q3. It contrasts sharply with the first half of the year when virtually all product manufacturers experienced a significant fall in sales, which highlighted key problems for the industry suffering from the effects of the sharpest fall in construction demand on record.

“Looking forward, product manufacturers expect the decline in sales to continue into the New Year. With private sector construction still anticipated to be weak and December’s Pre-budget Report indicating that government spending is expected to fall sharply over the next four years, it is critical that government does not cut spending in housing, education and transport infrastructure that is vital for long term economic recovery.”

Dominic McAra, a Director in the Ernst & Young’s Construction Products team added; "The score in this quarter's barometer shows some signs of encouragement for 2010, particularly for Heavy side companies, although this increase starts from a very low confidence level. Most companies are still expecting a continuation of tough trading conditions next year, but the hope is that 2010 will at least see a more stable position than seen in 2009.

"Companies will still need to monitor cash flows carefully in 2010, particularly during the traditionally poor winter trading period. Long term cash reserves, and retaining capital, will be key to most companies as it is still likely to be some time before trading returns to pre-recession levels."

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