What Q3 points towards for 2017 within Building Products

As the bump in the road that was 2016 has come to an end, it's time to take stock and wonder whether the year was in fact as traumatic as some would have had us believe.

I think we can all agree that 2016 was unpredictable and at the moment on a political front 2017 seems to be heading in a similar direction. The implementation of Article 50 is still to take place and who can say what impact, if any, Trump’s inauguration will have on our shores. 

However uncertainty doesn’t necessarily have to mean negativity and, cutting through the doom-mongers, there is a decent dollop of positive news coming from within construction and associated building product manufacturing of late (ok, we are not quite at the heady days of 2006-2008 or the resurgence witnessed in 2013-2014).  The Purchasing Manager Index (PMI) has released the latest performance figures for December.  Based on these figures, conversations I’ve had from within the market, various seminars and exhibitions attended and media consumed, here are some of the findings and hopefully an indication of where the industry is likely to lead in the new financial year:

  • Q4, and in particular December, saw the fastest increase in order volumes for the whole calendar year
  • Job creation within the sector through December has been at its highest since May.  Both order volume and job creation cyclically drop in December (Q3 as a whole) and so, to my mind, this is impressive
  •  Exporting construction materials continues to grow, but at a steadier rate than that immediately witnessed after our decision to leave the EU.  Raw material supplies continue have continued on their upward trajectory, with manufacturers and the whole supply chain experiencing the highest rate raises since April 2011
  • Contractors are getting wise to these increased price rises by stockpiling products/systems.  This is, however, putting further strain on core building product manufacturers who are already operating near or at full capacity (as I’ve witnessed working with a large brick manufacturer and a global commercial glazing manufacturer of late)
  • Most importantly there is a noticeable increase in contractor confidence regarding what 2017 is likely to bring for industry and associated supply chain.  A recent survey completed by the Construction Index highlighted that 48% of respondents expect an increased order book whilst, importantly, only 13% expected a decline.
  • The easing of planning laws, further releasing of brownfield sites and innovation within offsite manufacturing has further buoyed the residential market throughout 2016.  This, it would seem, is unlikely to wane in 2017.  Significantly both civil and commercial projects have been on a marginal increase in Q3.  Given foreign investors nervousness to investment in office space in the UK post-Brexit, this has been seen as a marginal win.

So I hope you agree, all in all not a bad end to 2016 and, I hope, a glimmer of some more positives yet to come. This leads me finally to wish all Collingwood’s Construction and Building Products clients, past, present and future a very happy and prosperous 2017!

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