If Covid and the ensuing supply disruptions of 2020/21 were the proverbial Round #1… Round #2 has seen many product suppliers climb back into the ring to absorb blows from rising staff costs and squeezed margins, as they struggle to fully pass on the cost hikes of the last 18 months.
The easing of supply chain challenges has allowed them to reduce stock levels, releasing precious cash, but diminished residential demand has now emerged as the opponent for suppliers to contend with as they head into Round #3.
In the last 6 months, 48% said they have experienced a reduction in demand. And now over half expect a continued decrease in demand for the next 6 months.
This question of demand levels, along with genuine concerns for increased trade company liquidations and payment defaults by clients is beginning to occupy the minds of a majority of our respondents. July’s building merchant sales and payment arrears data, compiled by Creditworks, a locally-based credit data bureau, suggests we’re currently experiencing falling sales year on year against a backdrop of slightly elevated 90+ day payment arrears. Although to put this in context, we are comparing a record year, and compared to July 22 national building merchant sales were down a modest 11%, and arrears are still very healthy.
Other promising news is that we do appear to be at the bottom of the curve. Monetary policy appears to be having the desired effect, immigration and population data are positive, house prices are beginning to show growth and the expectation of a fresh centre-right government from next month hopefully means the bell for Round #3 will be heard sooner rather than later.
For a deeper dive into the findings of our 2023 Q3 Supply Chain Update, download a copy of the latest Pulse report and head to page 11.