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Sales of construction products rise again

Sales of construction products rose significantly during the second quarter of 2010 and manufacturers are confident they will continue to grow once again in the third quarter, according to the latest Construction Activity Barometer from Ernst & Young and the Construction Products Association.
In the barometer, a figure of 50 represents no change in sales compared with a year earlier with below 50 representing a fall in sales.

The second quarter's overall result of 77 suggests conditions for product manufacturers are improving. However, this comparison is drawn against 12 months ago when sales were at a historic low.

Heavyside manufacturers rose to 79 in the second quarter, the highest level since the second quarter of 2007, while lightside manufacturers were also positive with a score of 66.

Looking ahead, the majority of construction products manufacturers expect their sales to continue to rise in the third quarter, compared with the same quarter one year earlier.

'This latest survey illustrates the situation for the construction products industry is substantially better than it was one year ago but, with major public spending cuts looming, manufacturers fear sales will fall sharply once again,' commented, Noble Francis, economics director for the Construction Products Association.

'With government capital expenditure set to be cut by £100billion during the next five years there is a real danger any recovery in the construction industry will be delayed.

'This would seriously impact upon manufacturers and suppliers of construction products, holding back a return to growth in the wider economy,' added Francis.

'It is good to see confidence returning, although the comparison is with a bad quarter 12 months ago and is after a tough January/February 2010,' said Dominic McAra, a director in the Ernst & Young's Construction Products team.

'This increased confidence has also been reflected in the return of transaction activity to the sector, even if this is still at a more subdued level than pre-recession.'

'The next six to 12 months will be a challenge for the sector as the proposed capital cut backs take effect. Those companies with a restructured cost base, and re-financing in place, will be in the best position to deal with these challenges while still taking advantage of any private sector recovery.

'Others may have to approach the next few months with more caution.'
2 July 2010

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