Monthly construction output is estimated to have increased +0.2% in volume terms, following an upwardly revised increase of +2.6% increase in February 2023 by the Office of National Statistics (ONS). Quarter 1 output was +0.7% up on Q4 2022 with the increase coming solely from a rise in repair and  maintenance (4.9%) as new work fell -1.9%, according to the ONS. The Construction Product Association (CPA) pre-emptively downgraded their forecast from an expected fall of -4.7% to -6.4% in 2023. Private housing output, which accounts for 70% of Trade Paint volume, is expected to decline by 17% in 2023 due to higher mortgage rates caused by Liz Truss’ mini-budget.

Other factors influencing Trade Paint channel are inflation and discretionary income, which allows for non-essential purchases like e.g. hiring a decorator. With latest inflation figures at higher than expected 10.1% (ONS), consumers must rationalise every purchase. The most affluent households are able to offset the increasing cost of essential goods with +1.0% growth in weekly discretionary income (Feb 23 YoY). For middle income households this figure is -7.0% leaving them with £76 less to spend on non-essentials. For the least affluent households, discretionary income is -12% (£58).

On the flipside, people who have discretionary income but have been priced out of their mortgage may choose to renovate their current property with the hopes of selling it when the interest rates are more affordable. This seems to coincide with the Trade Paint market performance, as the latest March monthly volume flash figures are up +1.9% Year on Year (YoY). The Q1 YoY comparison shows a modest -1.1% decrease in volume which is reassuring, considering Q1 2022 was up by 0.8% vs 2021, following pent-up demand from the Omicron lockdown. The March increase was mainly driven by 2Q White Emulsion (contract matt products such as Vinyl Matt or premium Diamond Matt), which is overperforming by +6.4% in Q1 2023 YoY as developers race to complete new builds before recession. While February 2023 was the driest February since 1993, March was the complete opposite, with the Exterior Category down -13% in Q1 23 YoY.

A wider recovery in economic growth in 2024 is expected to boost demand for both new build housing and RMI (Repair, Maintain, Improve) activity and total construction output is forecast to return to growth, rising by +1.1%.