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Pent-up demand fuels improved joinery sales but will the forward momentum continue?

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19/08/2014

Pent-up demand fuels improved joinery sales but will the forward momentum continue?The BWF Joinery State of Trade Survey Q2 2014 indicated that there had been an increase in joinery sales volumes from Q1 2014 to Q2 2014, and manufacturers are optimistic that this will be continuing through into the second half of the year.
 
BWF Policy Executive Matt Mahony commented on the survey results:
 
“Anecdotal evidence from the end of Q1 indicated that workshops were becoming busier and had been dealing with pent-up demand after a slow, weather affected, start to the year. The survey results supported this with respondents reporting the highest sales volumes increase on balance since the BWF Joinery State of Trade Survey began in 2012 and the highest percentage of manufacturers with order books stretching past one month. It was also encouraging to see more than half of respondents operating at over 80% capacity for the first time since the last quarter of 2012.
 
With sales matching up to the expectations of joinery companies, the upsurge in demand has, however, brought some of its own problems, such as the need  to increase the workforce at short notice. In addition to this, after nearly six years of falling real wages, rises in UK weekly earnings have finally caught up with inflation – these additional factors are reflected in the survey results with almost two-thirds of respondents reporting increased labour costs over the past year and a quarter now listing labour availability as a constraining factor.
 
Raw materials and energy costs continue to be major factors in increasing unit costs, raising questions about whether a sustainable boost to margins can be delivered. But let us not deny that this is a step in the right direction as construction output belatedly grows back towards it’s pre-crisis 2007 peak.”
 
Key points from the BWF Joinery State of Trade Survey Q2 2014 included:
 
– A balance of 63% of joinery companies reported an increase in sales volumes for Q2 2014 compared to the previous quarter. This follows on from 6% of joinery companies reporting a decrease in sales volumes in Q1. Sales volumes results showed a balance of 59% of respondents reporting an increase over the past year.
 
– Manufacturers also remained confident that sales volumes would improve in the next quarter, with a balance of 56% predicting an increase in Q3 2014, and a balance of 64% predicting an increase over the next year.
 
– 74% of respondents had been using more than 70% of their manufacturing capacity in Q2, up from half of respondents over Q1. 77% respondents indicated they would be using over 70% capacity over the next quarter, with 80% over the next year.
 
– 64% of respondents noted an order book between 1 and 3 months (up 20%), with the proportion of respondents reporting an order book extending beyond 3 months the same as the previous survey.
 
– 27% listed demand as a likely constraint on activity over the next year (down from 50%), with labour availability also at 27%.
 
– Raw material costs increased for 75% of respondents on balance, with energy costs, wages & salaries and fuel costs reported as having the next highest increases.
 
– Investment in product improvement had been increased by 57% of companies on balance over the next year, with a balance of 62% having boosted investment over the previous year. 49% of respondents on balance were planning to boost manufacturing equipment spending with the same proportion having increased spending over the previous year.

 
The results complimented those of the latest Construction Trade Survey, which highlighted that activity rose in the second quarter of 2014 across all areas of construction, including building contractors, SMEs, specialist contractors, civil engineers and product manufacturers.
 
Pent-up demand fuels improved joinery sales but will the forward momentum continue?Private new housing was the key driver of construction activity with 41% on balance of contractors reported that private housing output rose in Q2 compared with a year ago. Commercial output and work in publicly-funded education and health construction saw growth compared to a year ago, reflecting the recovery in capital investment in 2014/15 with less than a year to go to the next election.  
 
Commenting on the survey, Dr Noble Francis, Economics Director at the Construction Products Association, welcomed the results but noted that it hadn’t all been plain sailing for the industry:

“Many major contractors are still working on projects won in 2013 at relatively low prices but have been suffering from the key concerns of rising costs and skills availability, especially in specific sectors such as private new housing.  Overall, 80% of building contractors reported, on balance, that costs rose over the past year; 95% reported that materials costs rose over the past year and 75% reported that labour costs rose over the past year.  In terms of skills, 47% of building contractors reported that bricklayers and carpenters were difficult to recruit.”

BWF members are able to log in and download the latest Joinery State of Trade Survey and Construction Trade Survey here: https://bwf.org.uk/publications/market-research

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