HARD DATA UK Construction equipment sales made a strong start to 2023

The CEA’s Market Analyst, Paul Lyons, provides his insight into what is happening in and around the construction equipment market…

Retail sales of construction and earthmoving equipment showed further strong growth in the first quarter of 2023 and ended up at 9% above Q1 2022 levels, reaching 9,500 units, as shown in the chart below. Sales in 2022 ended up at 3% above the previous year’s levels and registered record high levels since the financial crash in 2008. Against this background, the market is still experiencing exceptional levels of activity in the early months of the year. Sales statistics are taken from the construction equipment data exchange run by Systematics International.

High levels of sales were anticipated in the early months of 2023 in previous reports as the market is still catching up from the supply chain constraints experienced in the first half of 2022. While the situation has been improving for some time, delivery of some equipment is still on long lead times from orders placed last year as the “catch up” continues. However, it is expected that sales will slow down in the coming months when the catch up is complete and the impact of weaker levels of construction activity is experienced.

The pattern of sales for the major equipment types provided a mix of performances in the first quarter of 2023. Crawler excavators and wheeled loaders showed the strongest growth, at 15% above Q1 2022 levels. In contrast, Mini/Midi excavators (up to 10 tonnes), the most popular product in the UK market, showed growth of only 4.5% in Q1, at only half of the average growth of 9% across all products in the first quarter.

In their most recent forecast published in April, Off-Highway Research are anticipating that sales of construction equipment will show a modest fall of 4% this year in the UK as the impact of high inflation and reduced activity in the construction market is experienced. It is anticipated that this will be followed by a further 2% decline in sales in 2024. So overall, a mild downturn is anticipated for equipment sales following a strong post Covid recovery.

The Construction Products Association (CPA) have published their Spring forecast for the UK construction market. This has downgraded their forecast for construction output in 2023 to a fall of 6.4%, compared with a decline of 4.7% in their previous forecast in January. Further details are highlighted below.

Construction equipment sales in the Republic of Ireland are also recorded in the construction equipment data exchange. This also showed a strong first quarter, with sales at 11% above Q1 2022 levels. This was a welcome return to growth, after sales in 2022 showed an 8% decline on 2021 levels.

Construction output slowing down and forecast to decline in 2023

The latest figures from the Office for National Statistics (ONS) show that growth in construction output was slowing down in 2022 and flattened out in the first quarter of 2023, with only 0.7% growth compared with Q4 2022. Growth in output in 2022 was 6.2% following the post covid recovery of just under 13% growth in the previous year. Statistics on new orders for construction indicate a declining trend. Total orders in 2022 were relatively flat at 1.4% above the previous year. However, this included a decline of 3.2% in the last quarter and has been followed by a 12.4% fall in Q1 2023, compared with the previous quarter.

The UK construction Purchasing Managers Index (PMI) published by IHS Markit is a good indicator of current activity levels within the UK construction industry. The April report is shown in the chart below and indicates that the index has remained positive for the last three months, just above the 50.0 “no change” level. The survey highlights a very mixed picture for the three main sectors within the industry. Housing saw the biggest decline in activity since May 2020, while rising volumes of Commercial and Civil Engineering work kept the index positive overall. Encouraging feedback in the April survey included improving availability of materials and fewer instances of transport delays. Also, input price pressures eased with the rate of cost inflation at the lowest for almost two-and-a-half years.

The Construction Products Association (CPA) published their Spring forecast for the UK construction market in May. This anticipates a 6.4% fall in construction output in 2023, steeper than the previous forecast in January when a 4.7% fall in output was expected. The latest forecast identifies private housebuilding and repair and maintenance as the drivers of the decline. These are the two biggest construction sectors and are impacted significantly by declining household incomes and high interest rates. The third biggest sector, Infrastructure, is still forecast to show growth in 2023, but at lower levels than previously expected due to the Government delaying work on the HS2 project and some major road schemes. The forecast for 2024 is for construction output to stabilise and show modest growth of 1.1% compared with 2023. https://www.constructionproducts.org.uk

Paul Lyons will be at Plantworx – you can contact him via the CEA stand. Look for the Gilmores Bar signs. Or you can email him on paul.lyons@thecea.org.uk