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Firms report lowest level of cost inflation since Q4 2008

Construction product manufacturers saw cost inflation fall to its lowest level since Q4 2008 during the last quarter of 2015, according to data from the Construction Products Association (CPA).

Only 8 per cent of light side firms and 14 per cent of heavy side firms reported, on balance, that costs had increased in Q4 2015.

In the previous quarter, 40 per cent of heavy side firms and 20 per cent of light side firms reported an increase in costs, according to the CPA’s State of Trade Survey for Q4 2015.

Falling costs were largely driven by tumbling oil prices, with 52 per cent of heavy side firms and 50 per cent of light side firms, on balance, reporting a decline in fuel costs. The fall was also driven by lower energy costs and favourable exchange rates.

Sales volumes continued to increase, with 5 per cent of heavy side firms and 38 per cent of light side firms reporting that sales rose during Q4 2015. This represents the eleventh straight quarter of sales growth for the sector.

However, heavy side firms’ growth in sales was the lowest reported since Q1 2013, reflecting a fall in construction output in the latter half of the year. 

Rebecca Larkin, senior economist at the CPA, also attributed this decline to a decrease in export sales “as Sterling appreciated against the Euro in late 2015”.

”On the light side, where products are typically used towards the end of the construction process, more than a third of firms reported a rise in Q4 quarterly sales, indicating continued demand from strong building activity earlier in 2015,” she added.

Both heavy side and light side firms expect sales to rise by around 40 per cent during 2016 driven by the strength of the domestic market; 9 per cent of heavy side firms and 20 per cent of light side firms reported that exports had fallen in Q4 compared to a year earlier.

During Q4, most firms reported that they were focussing on product improvement and plant for their capital investment. On balance, 60 per cent of heavy side firms reported a higher level of investment in plant and equipment during the last quarter of 2015 compared to a year earlier, while 55 per cent of light side firms, on balance, said that investment in product was 55 per cent higher over the same period.

 

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