The CEA’s Market Analyst, Paul Lyons, provides his insight into what is happening in and around the construction equipment market …
Construction equipment sales fell by 39% in the first half of 2020
Retail sales of construction and earthmoving equipment in the UK market fell by 39% in the first six months of the year compared with the same period in 2019. Sales in the second quarter fell by 54%, reflecting the worst of the COVID-19 pandemic, after showing a 22% decline in Q1, compared with 2019. This is illustrated in the graph below showing quarterly sales on an index basis, using Q1 2018 as 100. Source: the Construction Equipment Statistics Exchange, Systematics International.
The monthly pattern of sales in the second quarter of the year presents a more positive story. The decline in sales in June was 36% below 2019 levels, after following much more significant falls of 74% in April and 54% in May. This clearly suggests that the low point in new equipment sales due to the pandemic was reached in April, when sales were just below 800 units. Since then, sales have recovered in May and June, with sales reaching just over 2,000 units in June, as the return to work within the construction sector continues.
A distinctive feature of equipment sales in the first half of the year has been the resilience of sales of the most popular equipment type, mini/midi excavators (under 10 tonnes). Sales of this product were only down by 23% in the first half of the year, which is less than half of the fall experienced by all of the other equipment types, which experienced declines of 50% or more in sales compared with the first half of 2019. Sales of telehandlers (for construction only) and compaction rollers saw the biggest declines in the first six months, at over 60% down compared with 2019.
Construction output forecast to fall by 25% in 2020
The latest UK construction Purchasing Managers Index (PMI) published by IHS Markit in July is shown below. This shows that the index continued its strong recovery, reaching 58.1, after crashing to an all-time low of 8.2 in April. This latest survey indicates the strongest growth in activity since October 2015, and reflects the ongoing re-opening of construction sites and the supply chain within the industry. The latest survey highlights that the house building sector is showing the strongest recovery.
The optimism expressed in the latest construction PMI survey is very welcome, when considering the latest figures for construction output. This shows that output showed a record fall of just under 30% in the three months to May, including a decline of 40% in April. In the first CEA “Power Hour” webinar, Fergus Harradence from BEIS presented a forecast for the UK construction industry. This anticipates that output for the full year will show a fall of 25%, with private housing and commercial suffering the most significant falls. This forecast assumes that recovery will continue in the second half of the year, without any further national lockdowns damaging activity.