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| UK construction activity grows but costs hit five-year high UK construction activity grows but costs hit five-year high | |
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| British construction firms continued to rebound from their post-referendum soft patch last month but reported the steepest rise in prices for more than five years. | British construction firms continued to rebound from their post-referendum soft patch last month but reported the steepest rise in prices for more than five years. |
| In the latest sign that the pound’s sharp fall since the Brexit vote is raising import costs for UK businesses, the poll of construction firms (pdf) showed they reported a “steep and accelerated rise” in what they were paying for building materials in November. That put the rate of inflation in the sector at the highest since April 2011, according to the survey’s compilers IHS Markit. | In the latest sign that the pound’s sharp fall since the Brexit vote is raising import costs for UK businesses, the poll of construction firms (pdf) showed they reported a “steep and accelerated rise” in what they were paying for building materials in November. That put the rate of inflation in the sector at the highest since April 2011, according to the survey’s compilers IHS Markit. |
| Overall, construction sector activity expanded for the third month running and at a faster pace than economists had forecast. The main reading on the Markit/CIPS UK construction purchasing managers’ index (PMI) edged up to an eight-month high of 52.8 from 52.6 in October. That was above the 50 mark separating expansion from contraction and beat forecasts for 52.2 in the Reuters poll of economists. | Overall, construction sector activity expanded for the third month running and at a faster pace than economists had forecast. The main reading on the Markit/CIPS UK construction purchasing managers’ index (PMI) edged up to an eight-month high of 52.8 from 52.6 in October. That was above the 50 mark separating expansion from contraction and beat forecasts for 52.2 in the Reuters poll of economists. |
| Order books also improved at the fastest pace for eight months and construction firms hired new workers to match the rising demand. | Order books also improved at the fastest pace for eight months and construction firms hired new workers to match the rising demand. |
| Tim Moore, a senior economist at IHS Markit, said the sector had continued to recover from a slow third quarter. | Tim Moore, a senior economist at IHS Markit, said the sector had continued to recover from a slow third quarter. |
| “The brighter picture reflected another solid contribution from residential building and renewed growth in commercial work, which some companies linked to a resumption of projects that had been delayed after the Brexit vote,” he said. | “The brighter picture reflected another solid contribution from residential building and renewed growth in commercial work, which some companies linked to a resumption of projects that had been delayed after the Brexit vote,” he said. |
| But optimism among building firms remained relatively subdued, Moore added. | But optimism among building firms remained relatively subdued, Moore added. |
| “A number of firms cited uncertainty related to supplier price hikes as an emerging threat to the construction sector, with survey respondents commenting on difficulties forecasting project costs against a backdrop of rapidly changing inflationary pressures.” | “A number of firms cited uncertainty related to supplier price hikes as an emerging threat to the construction sector, with survey respondents commenting on difficulties forecasting project costs against a backdrop of rapidly changing inflationary pressures.” |
| The signs of cost pressures in the construction sector echoed Markit’s survey of the manufacturing industry published on Thursday. That showed UK factory growth had eased as the weak pound further drove up firms’ prices in November. | The signs of cost pressures in the construction sector echoed Markit’s survey of the manufacturing industry published on Thursday. That showed UK factory growth had eased as the weak pound further drove up firms’ prices in November. |
| Economists are now looking ahead to news from the much larger services sector on Monday for a steer on how overall economic growth fared last month. | Economists are now looking ahead to news from the much larger services sector on Monday for a steer on how overall economic growth fared last month. |
| The general picture from the PMI reports since the referendum has been of a short sharp shock in July followed by a rebound and reasonably solid growth since August. That largely chimes with other economic indicators suggesting firms and consumers have shrugged off the Brexit vote for now but are worrying about inflation picking up. | The general picture from the PMI reports since the referendum has been of a short sharp shock in July followed by a rebound and reasonably solid growth since August. That largely chimes with other economic indicators suggesting firms and consumers have shrugged off the Brexit vote for now but are worrying about inflation picking up. |