Helping Product Manufacturers Forecast Demand

Nyssa Patel, Industry Analyst and Economist at the Builders Merchants Federation explains how they have developed a unique method of forecasting demand.

Launched in the spring of 2019, the quarterly Builders Merchants Forecast Report, uses a unique forecasting model specifically developed for the UK merchant sector and the building materials supply chain.

While most forecasts tend to be based on lag indicators – using what happened last year to predict what could happen next year – the BMF model incorporates up to date data through the builder’s merchants building index. Data is attained from over 80% of generalist builders’ merchants’ sales as well several lead indicators to signal future events that will impact our markets.  It was specifically developed to make it possible for merchants and their suppliers to forecast their customers’ requirements more accurately.

Covering a two-year forward period, the forecast is updated on a quarterly basis. The latest edition – Winter 2019 – covers the period to December 2021 and includes detailed forecast results and analysis together with merchant and supplier industry insights and wider economic indicators.  For example, it considers factors affecting the current housing market and the potential impact of the Government’s drive towards a low-carbon economy and Net Zero 2050. As well as a valuation of the merchanting sector in 2018 as part of the UK Building Materials market.

During 2019, all trends were thrown off due to the ongoing political and economic uncertainty. The slowdown in growth experienced in the latter half of 2019 is expected to continue into the first quarter of 2020.  However, 2020 Average Year-on-Year sales growth values offer a more optimistic outlook with the baseline forecast predicting growth rates of 4.6%, and Soft and Hard Brexit outcomes forecast at 4.4% and 4.0% respectively.

Going forward, with the outcome of the UK’s post-Brexit trade negotiations with the EU and others still unknown, the Report will continue to provide an analysis for three scenarios, a baseline forecast using current factors, a soft Brexit outcome and a hard Brexit outcome.

The next edition, due to be released in March, will provide both an industry and economic review of 2019 as well as being extended to forecast the period 2020 – 2022.