The most recent quarter has been a difficult one for merchants, mirroring much of what has been observed in the wider UK economy. House prices and property transactions are down against 2022 Q3, with the Bank of England increasing its interest rate to combat stubborn inflation.
Value growth is down by -3.3% in Q3 compared to 2022 Q3. While still in negative territory, this is an improvement from Q2 when value was down by -4.1%. Third quarter volumes were down by -10.5% using the same comparison, with price growth sitting at 8.0%. Price growth understandably remains a key topic for readership of this publication and is worth unpacking a bit more in the following paragraph.
Historically the average price growth has always been kept at a certain level due to a consistent product mix. Over the past year the contribution of Bricks and Blocks, which have a lower individual unit price, has reduced while there has been an increase in higher priced items such as Aggregates, Cement, Insulation, Plaster and Plasterboard. These higher priced items contribute enough volumes to the market, while also seeing better volume performance in the past year, to push up the average price. As a final point it’s also worth mentioning that most of these have already peaked by the first quarter of this year, so price growth should see a noticeable drop over the coming months.
On a category level, Timber & Joinery has contributed most to the Q3 on Q3 decline, being down by -13.1%. Heavy Building Materials declined by -1.5%, while Landscaping was down by -7.0%. It’s interesting to note that all of the Lightside categories saw growth, which is reflective of the stronger performance of RMI in 2023. Decorating is up by 10.5%, Plumbing, Heating & Electrical by 9.1% and Tools by 9.0%. In most instances the value growth is mostly underlined by positive volume performance too, and price growth that is lower than the official UK inflation rate. This already shows some positivity in the market outside of the core categories.
The reality is that the fourth quarter will likely be difficult as the longer term problems associated with a cost-of-living crisis, inflationary pressures and mounting geopolitical issues continue to directly and indirectly affect new builds and project pipelines.