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Credit crunch not dampened demand for construction products

Sales of construction materials continue to boom despite the recent uncertainty in financial markets which has led to a 'credit crunch' from the banks.

The Ernst & Young/Construction Products Association Activity Barometer shows that the construction product sales recorded a score of 73 in the third quarter, above the no change mark of 50.

This is only slightly down on the record score of 80 for the second quarter. However, sales are expected to "moderate" in the fourth quarter as the credit crunch takes effect but at a predicted score of 66 is still well above the "no change" mark.

“The Barometer findings indicate that the construction industry remains buoyant, with both heavy and light side firms seeing sales volumes ahead of a year ago, said Máren Baldauf, economist for the Construction Products Association.

"However, year-on-year sales growth is set to moderate during the fourth quarter. Whilst this partly due to the strong finish to last year, it is also reflects greater industry caution in light of the current turmoil in financial markets."

Dominic McAra, director at Ernst & Young’s Building Products team commented: “The impact of the credit crunch is evident across a number of market sectors so a level of caution in this sector is understandable. The fact that the crunch has not hit current sales is encouraging however.

“It will be interesting to see whether the crunch impacts M&A in the sector, or whether those consolidators with funds in place are able to continue with their activities. A number of the energy efficient products may still be sufficiently attractive to continue to attract investment.”

The third quarter barometer shows that "light side firms" (82) have stronger sales than "heavy side firms" (65) due to the growing popularity of energy efficient products for homes.

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