The latest figures from the Builders Merchants Building Index (BMBI), published in November, show that Q3 2023 volumes fell -10.5% compared to the same period in 2022. Total value sales were down -3.3% with prices rising +8%. There was no difference in trading days.
Year-on-year, eight of the 12 categories sold more in Q3 with renewables and water saving (+27.8%) once again significantly ahead of the rest. The three largest categories all sold less: Heavy building materials (-1.5%), landscaping (-7%) and timber and joinery products (-13.1%).
Total value sales dipped -1.4% in Q3 2023 compared with April to June 2023. Volume sales dropped -2.1% and prices edged up +0.8%. Timber and joinery product sales were flat (-0.1%). With four more trading days in the most recent period, overall like-for-like sales were -7.5% lower in July to September compared to Q2.
“The construction industry is no stranger to economic fluctuations and environmental concerns, however, what we are currently seeing is clearly worse than the normal fluctuations,” said Simon Woods, European sales, marketing and logistics director, West Fraser and BMBI’s expert for wood-based panels.
“Inflation is a critical economic indicator that directly impacts the construction industry. While it may be encouraging to see inflation falling, the rate of decline is slower than we might hope for. Interest rates have recently stopped their upward climb, providing some relief for borrowers. However, the term “higher for longer” is now a common refrain among economists. While this scenario might be advantageous for consumers in the short term, the long-term implications for construction financing need to be considered. For those of us involved in residential construction, the shift in mortgage rates is significant. The end of fixed-rate mortgages means potential homeowners will need to grapple with variable interest rates or a new fixed rate – both at much higher levels than the fixed rate they are exiting.
“Construction projects often span multiple years, and contractors must anticipate potential interest rate increases, which can impact project costs and profitability and often lead to projects being shelved due to overall project costs. The lacklustre expansion of our GDP limits the availability of new projects and constrains economic opportunities for construction. Unemployment levels are a mixed bag for the construction industry. Historically low unemployment rates indicate a robust job market, which can attract skilled workers to the industry. However, the recent increase in unemployment levels is a cause for concern.
“All in all, we are facing difficult conditions, which don’t seem to be changing fast enough to make 2024 much more interesting than 2023.
“One of the most noteworthy developments in the construction industry is the increasing prominence of timber as a construction material. As environmental concerns grow, the focus on sustainable building practices becomes more pronounced. Timber has emerged as a champion in this regard, offering a renewable and carbon-friendly alternative to traditional construction materials like concrete and steel.”
