Construction product manufacturers grow strongly

Firms are showing increasing signs of optimism and, for the first time in five years, product manufacturers reported increases in capital investment across all areas of their business. Following on from Q1, both heavy side and light side firms reported increasing cost pressures stemming from wages and salaries. Whereas lack of demand remains a key concern for light side manufacturers, data from heavy side firms suggests that capacity pressures may be emerging. Kallum Pickering, senior economist at the Construction Products Association, said: "These results confirm that the construction products industry is firmly on the path of recovery. All firms reported that sales increased compared with the second quarter of last year and, looking forward, no firms expect sales to fall over the coming year. These findings fall in line with the recent broadening of growth across private construction. "There are clear signals that firms are looking to capitalise on the positive growth outlook. Both heavy side and light side firms reported that capital investment increased across all areas of business and, investment intentions over the next 12 months were equally positive. "Product manufacturers increased headcount for a fourth consecutive quarter, and whilst this is positive news, data on cost inflation suggests that wages are beginning to make a significant contribution to rising costs of firms. 95% of heavy side firms and 80% of light side firms indicated that wages and salaries contributed to cost inflation in Q2." More than four fifths of product manufacturers (83%) anticipate sales rising over the coming year and 65% expect sales to rise by over 5% in the next year. Costs continue to rise with 87% of firms reporting a rise in costs primarily due to wages and salary.