Recovery Well Underway but Material Cost and Supply Concerns Mount
The construction products manufacturing sector posted a fourth successive quarterly expansion in the second quarter of 2021, according to the latest Construction Product Association’s (CPA) State of Trade Survey. Private housing, infrastructure and private housing repair, maintenance and improvement (rm&i), in which activity remains firmly above pre-coronavirus levels, continued to be the main drivers of growth. Material cost inflation, however, remained a prominent feature and supply-side constraints were seen as the key concern for the year ahead.
In 2021 Q2, nearly two-thirds of heavy side manufacturers and 44% of light side manufactures reported that sales had increased compared to Q1. With demand in private housing and private housing rm&i expected to be sustained by both government stimulus and increased appetite for properties with more outdoor and office/study space, 67% of light side firms expected a rise in product sales in the year ahead. On the heavy side, this balance (79%) was the highest in nearly eight years, reflecting work occurring on large infrastructure projects. Plans for hiring also remained on the table, with 61% of light side firms anticipating increasing headcount, the highest balance in seven years.
The supply of raw materials and components over the coming year remains the largest concern for manufacturers due to bottlenecks in the global supply chain. Unsurprisingly, raw material prices followed next as a potential constraint for heavy side firms alongside demand, whereas labour availability concerns rose up the agenda for light side firms.