Sales Growth in Q3 but Mixed
Picture for Year Ahead
September 2017

The latest Q3, 2017 CAB State of the Market Survey holds up well compared to other economic data released for the same period. Early indications from ONS are that construction output declined 0.7% in Q3 2017, the largest fall since 2012 Q3, while the CBI are indicating manufacturers investment decisions for the year ahead deteriorated, particularly for buildings. However, construction product sales continued to increase in Q3, the eighteenth consecutive quarter of growth since 2013 Q2. CAB’s quarterly survey showed 31% of member firms net balance increased sales in Q3. Looking ahead, expectations for growth amongst CAB members were 44% net balance for the next quarter and 56% net balance for the year ahead. Once again these figures compare favourably against the overall Construction sector (-21% and 28% respectively).

The key driver of cost inflation in Q3 was raw materials (100% net balance), owing to the weak Sterling exchange rates and rising global commodity prices. In addition, 73% net balance reported rising wages and salaries.

Demand was reported as the key constraint on sales growth over the next 12 months, 63% net balance (40% net balance in Q2), with raw materials prices 13%. No constraint on activity was reported by 13% of members.

In Q3, expected capacity utilisation remained low. Only 20% of members reported that they expected to operate at between 90% and full capacity over the next quarter (20% for the year ahead).

Capital investment again remained one of the key priorities with the focus over the year ahead being product improvement (81%) followed by plant and equipment (63%) and R&D (56%). Encouragingly, across all the capital investment there was a view that investment would increase year on year in product improvement, R&D and e-business while property remained the same. The only noticeable fall was customer research (38% net balance for the year ahead against 50% for the past year).