The very latest Q3 2016 CAB State of Trade Survey highlights strong signs of growth in the year ahead with the caveat of rising unit costs. With the wider construction sector showing growth for the 14th consecutive quarter, CAB members’ expectations for the next quarter recovered considerably with 53% net balance anticipating an increase in sales over the next quarter (45% for construction products) while a massive 80% net balance anticipated a rise in the next 12 months (38% for construction products) – the highest confidence level since Q2, 2015.
Outside of CAB members, although specialist Contractors, SME builders and Civil Engineering firms also reported growth in Q3, balances were weaker than reported a quarter earlier. The Construction Products Association reported that Main Contractors’ order books were lower in every sector except private housing during the quarter.
There has been upward pressure on wages and salaries (reported by 75% net balance of CAB members in Q3) in evidence since the beginning of 2014. The 15.6% year on year depreciation in the Sterling/Euro exchange rate during Q3 appears to have added further to the inflationary pressures in the supply chain by raising the price of imported raw materials. 88% net balance of CAB members saw an increase in Q3. Unsurprisingly, 100% net balance of members also forecasted rising unit costs in the year ahead.
Despite the excellent optimism over sales, insufficient demand was ranked by 69% net balance of CAB members as the most likely constraint on activity over the coming 12 months, but Labour availability (13%), No constraints (13%) and Raw material prices (6%) were also cited.
Capital investment was again one of the key priorities. Encouragingly, members forecasted increasing capital investment in all metrics (except Product Improvement) for the year ahead with Plant & Equipment (47% net balance of members) being the main focus. Other key areas were E-business (31%) followed by Customer research (24%) and R & D (24%).