Economic Week In Review | Issue 316 | 14 February 2022
Materials, goods and products
Oil | The International Energy Agency (IEA) has encouraged Saudi Arabia and the UAE to pump more oil to ease prices. Benchmark prices rose 15% in January, to above $90/barrel, for the first time since 2014. Recently the OPEC+ group has missed its production targets because of technical issues. The IEA also revised demand forecasts upwards suggesting the market is tighter than it first thought.
Iron oreprices fell after China promised to crack down on irregularities in the market, warning traders not to intentionally drive the price up or down. Earlier in the week prices were boosted by news that China had eased sustainability targets and offered five extra years of rising carbon emissions.
Iron ore production Miner Rio Tinto expects the first half of the year to be particularly challenging as the labour market in Western Australia is already “really right” and reopening borders may worsen supply issues. Western Australia provides 30% of the world’s iron ore and 70% of China’s imports.
Copper | Goldman Sachs has warned that the price of copper could increase later this year and there is a risk of an “extreme scarcity episode”. It explains that the limited seasonal build-up of copper inventories from record low levels (just over 200,000 tonnes, which is barely enough to cover three days of global consumption) is “entirely insufficient” to tackle its expected deficit of 197,000 tonnes for this year.
UK construction and property news
Chinese developers | The liquidity crisis following the collapse of Evergrande has led Chinese developers to sell assets in London. Almost half of the 30 largest developers breach of at least one of the new property leverage rules introduced in China.
HS2 Euston | The JV Mace/Dragados has set out the timetable for major package contracts for £500m of work over four years. It’s predicted that the work will provide 3,000 jobs.
Output | Total output overtook pre-pandemic levels, growing nearly 13% last year. Yet all new work remains nearly 2% lower and commercial still nearly 30% lower. Infrastructure still shows strong growth, passing its February 2020 level by 45%.
Wages | According to Hudson Contract average pay for construction workers increased 3.2% to £863/week in the year to January 2022. However it noted that several respondents claimed that there is still high demand for skilled tradespeople, but it is not as difficult to find skilled labour and that the glut of work seen at the end of last year has settled into a steady stream.
Trade | Brexit has impacted UK trade to the EU according to the Public Accounts Committee because of increased business costs and logistical issues. Imports of UK goods into Germany fell 8.5% last year (whilst total goods from all geographies into Germany rose 17.1% last year).
Rebound | The UK economy grew 7.5% last year, the strongest rate of growth since the second world war, despite growth falling back slightly in December because of the Omicron variant. In the three months to December, GDP was still 0.4% below its level in the final quarter of 2019.
Solvency II rules | Boris Johnson has promised an “investment big bang”, and to show that post-Brexit regulation changes can boost the economy. Reforming Solvency II will allow insurance companies to invest more in infrastructure. An insurance industry report claimed that they would have an extra £95bn to invest if the rules were relaxed.
Wages | A report by the Recruitment and Employment Confederation and KPMG said that overall availability of candidates for jobs has fallen at the fastest rate and starting salaries have increased at the third-fastest pace since records began in 1997. 63% of firms are facing pressure to increase wages.
Freeports | Two green freeports are to be established in Scotland in 2023. This new model of green ports aims to focus on inclusive growth, fair work practices, and delivering a net zero economy.
US inflation reached 7.5%, its fastest annual increase for 40 years. Many have called upon the Federal Reserve to act more aggressively to stop inflation from increasing further.
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
$ per £
€ per £
Brent Oil $/barrel
Speaking at an event, Joe Biden said that “inflation is up” and “ it matters”. After several years of low inflation, global prices are being driven by bottlenecks, policy changes, and demand, which has created an environment unfamiliar to many. Some of these pressures are fleeting (as shown by the two contrasting news stories this week on the price of iron ore) whilst others could endure for longer and could require more investment in production facilities or productivity gains.
The overall construction news is positive although, looking beyond the headline figure for output shows how reliant on infrastructure work the industry is, and how much scope there is for commercial output to recover (although it is worth remembering that the ONS’ description of commercial covers retail, restaurants, leisure etc as well as offices).
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