Inflation in raw materials will continue to push up prices for the rest of 2021, according to a new survey from the Construction Products Association (CPA).
The organisation’s State of Trade Survey for the first quarter of 2021 found housing is leading a recovery for the sector but material shortages are expected to hit prices for the next year.
The supply of raw materials and components is the primary concern for most product manufacturers, reflecting global supply issues for items including steel, timber, PVC and chemicals. Some 90 per cent of heavy side and 88 per cent of light side manufacturers reported an increase in the cost of raw materials during Q1.
Heavy side products are typically structural materials used early in the construction process including cement and steel, while light side products are mainly fittings and services, such as heating systems and insulation.
At the same time as input prices are rising, manufacturers are reporting an increase in demand, with activity above pre-pandemic levels. Some 41 per cent of heavy side manufacturers, and 46 per cent of light sight manufacturers reported an increase in sales in the first three months of the year, as well as on an annual basis, taking activity above pre-coronavirus levels, the CPA said.
CPA senior economist Rebecca Larkin said: “Encouragingly, manufacturers expect continued growth over the next year. This risks being held back by bottlenecks in the global supply of raw materials, however, notably in categories where a high proportion is dependent on imports. Inevitably, rises in input prices have followed and almost all manufacturers expect this inflationary pressure to persist over the next 12 months.”
There have been several recent warnings over materials costs in recent weeks including from the Builders Merchants Federation, steel specialist Billington and Travis Perkins.
The increased demand from the industry is being primarily driven by the housing market, Larkin said: “The construction industry continues its V-shaped recovery, resulting in another quarter of increased sales for product manufacturers. This appears to be the case particularly in private housing, which is experiencing a flow of pent-up demand and policy support from Help to Buy and the stamp duty holiday.”
The trade body also found that extensions of job support schemes and housing market stimulus by the UK Government, as well as activity on large-scale infrastructure projects have underpinned confidence that the recovery will continue.
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Material prices to remain high ‘for a year’ – Ian Weinfass – 2021-04-19 18:20:46