UK construction PMI slumps to lowest since Feb

    UK construction PMI slumps to lowest since Feb
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    Construction workers build a new house in Berkhamsted, Britain. Photo: REUTERS / FILE

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    Construction workers build a new house in Berkhamsted, Britain. Photo: REUTERS / FILE

    Activity in Britain’s construction rose at a slower pace last month than in February due to shortages of building materials and contractors, adding to the post-Covid bottlenecks in the economy.

    The IHS Markit / CIPS Construction Purchasing Managers (PMI) index fell from a 24-year high in June, from 66.3 to 58.7 in July. This was the lowest reading of the PMI since February and the sharpest drop in a month since April 2020, the first full month of Covid exclusion in Britain.

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    While the PMI continues to show steady growth in the sector, economists polled by Reuters expected a much smaller slowdown to 64.0.

    “Long delivery times and shrinking subcontractors’ availability have been cited as factors that have delayed work on site,” said Tim Moore, IHS Markit CFO.

    Some construction companies also reported that the rise in demand when lock restrictions were initially eased earlier in 2021 has now begun to subside.

    Highlights released overnight by the Royal Chartered Surveyors Institute gave a similar picture of supply constraints, including the growing shortage of masons, carpenters and inspectors.

    The British economy is recovering rapidly this year after suffering the biggest drop in output in more than three centuries in 2020.

    But there has been a sharp rise in inflationary pressures due to a mix of higher oil prices and supply chain congestion as the global economy emerges from lock-up months.

    The Bank of England is expected to revise its inflation forecast later on Thursday, and some economists see UK inflation – currently 2.5 per cent – reaching a decade-high of around 4 per cent at the end of the year.

    The BoE, like most other central banks, expects this rise in inflation to ease next year once the initial results of lifting the lockdown are over.

    The PMI construction index showed strong inflationary pressures at the pipeline stage, as construction companies’ costs rose slightly less than the 24-year high recorded in June.

    “Supply imbalances have been exacerbated by a lack of transport availability, port congestion and Brexit trade friction,” said IHS Markit.

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