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Economic Week In Review | Issue 279 10 May 2021

Property and construction news

  • Profit warnings | EY-Parthenon has warned that 40% of construction companies listed in the UK issued a profit warning in the year to the end of March 2021. This boosts concerns over finances after Covid-support draws to an end.
  • Construction output | The IHS Markit / CIPS PMI read 61.1 in April, a little below the 61.7 seen in March but still comfortably above the 50.0 marker for no change. IHS Markit said that the recovery is now balanced evenly across the house building, commercial, and civil engineering categories.
  • Central London Offices | According to Avison Young, take-up has increased 48% in Q1 2021 but investment fell 45%. Take up is still 46% lower than the ten-year quarterly average, however, the most recent reading comes after five consecutive falls.
  • London towers | A new image shows how the City of London will look in a few years time as six new skyscrapers join the cluster and the new City Plan encourages an animated ground plane. Many see these projects as increasing confidence in the future of the office and the City.

Global news

  • USA jobs | The US economy added 266,000 new jobs in April, fewer than expected in the wake of the recent $1.9tn stimulus package. The unemployment rate increased from 6.0% to 6.1%. Manufacturing jobs fell last month, aided by a large drop in the car industry, which has been particularly affected by the global shortage of semiconductors.
  • China-Australia Strategic Economic Dialogue | The high-level trade talks were suspended indefinitely as the political relationship has degraded. Iron ore is one of the largest segments of Australia / China trade and the current strains are not expected to have a significant impact. However other news highlights that Australia’s Department of Defence is considering whether to scrap a 99-year lease of Darwin Port to a Chinese company, showing the strained relationship.
  • India | Trade and investment deals with the UK worth nearly £1bn are to be outlined this week as part of a “2030 road map” designed to strengthen relationships.

Materials and commodities

  • RICS materials shortage | The latest survey by the RICS has warned of materials shortages, with 57% saying it was their biggest concern about momentum being maintained.
  • Steel | British Steel announced its seventh price increase since last summer. Prices are now 40% higher than in May 2020.
  • Iron ore prices are currently supported by high demand from China and five years of low output. Prices were pushed above $200/tonne for the first time in 14 years as the China-Australia Strategic Economic Dialogue was indefinitely suspended, as noted.
  • Copper prices reached a record high, passing its previous 2011 peak. Stimulus packages and a move to electrification are expected to push the commodity higher, possibly to $15,000/tonne by 2025 (currently $10,361).
  • Clean energy | High demand for metals used in solar panels, batteries, and wind turbines could slow the uptake of clean energy according to the International Energy Agency.
  • Glass | Saint-Gobain announced a £30m investment in its Eggborough factory. It will completely re-build a new float glass furnace and upgrade other parts of the factory. It will be the companies largest industrial investment in the UK since the plant was built in 2000.

UK news

  • Retail footfall is increasing as Covid restrictions are relaxed with the British Retail Consortium reporting that “footfall crept up on high streets and shopping centres”. The challenge ahead is to ensure that this confidence continues and the reopening is irreversible.
  • Spending spree | The Bank of England expects household spending to increase at its strongest rate since 1988. It has forecast consumers will spend 10% of the current savings glut, twice its previous view.
  • GDP forecast | In its latest forecast, the Bank of England has forecast GDP to grow 7.25% this year.
  • All in PMI | The combined index for manufacturing, services, and construction rose to 60.8 in April (from 56.8), its highest since March 2013.

Infrastructure

  • Roadbuilding | England’s £27.4bn roadbuilding plans could create 100 times for carbon than originally thought. Previous calculations analysed parts of the Road Investment Strategy (RIS2), using just five schemes out of 50, and fails to take into account 60 years of emissions, which is the period used for appraisal.
Tender Price Index

Published every six months, our Tender Price Index is an analysis of inflation price deviation in construction prices. Click on the link above to view our most recent Index.

Friday to Friday

Price / Index Week %
change
Annual %
change
FTSE 100 7,129.71 2.29 20.11
FTSE 250 22,775.28 1.24 40.17
Nikkei 29,357.82 1.89 45.49
CSI 300 4,996.05 -2.49 26.05
S&P 500 4,232.60 1.23 44.47
Nasdaq 12,752.24 -1.51 50.77
CAC 40 6,385.51 1.85 40.35
Dax 15,399.65 1.74 42.22
$ per £ 1.4000 1.18 12.62
€ per £ 1.1510 0.10 0.48
Gold £/oz 1,309.00 2.21 -0.60
Brent Oil $/barrel 68.28 2.43 120.47

Weekly Summary

The news seems to be increasingly positive with people returning to the office, the economic picture improving and construction output recovering across the sectors.

However, there remain several points for concern or to monitor, and top of this list is developments in the commodities market and how directly this may translate into construction material costs.

Current forecasts for GDP appear to rely heavily on consumer spending recovering so it will also be crucial to monitor how the economy comes out of lockdown and continues to open up in parallel with the removal of covid-support.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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