Risk, recession, or revival?

Economic Week In Review | Issue 329 | 16 May 2022

Materials and commodities

  • Copper prices fell to a seven-month low following a sixth weekly fall in prices as concerns of falling demand worsen.
  • Oil | OPEC cut its forecast for world oil demand growth this year amidst the COvid-19 resurgence in China and the ongoing war in Ukraine. It now expects demand to grow by 3.4 million barrels a day, a reduction of 300,000 barrels.
  • Steel | The European Commission is to announce an updated EU steel import safety regime later this month with new rules to be introduced in July. The current system, which includes tariff-rate quotas, was put into place during the Trump administration’s trade war.
  • Shipping | Throughput at Shanghai Port has increased to 80% of its 2021 level as authorities introduced new measures including national traffic permits and the resumption of approved jobs.
  •  Builders Merchants | Forecasts from the BMF suggest that sales volumes will flatten due to growing uncertainty in the pipeline caused by increasing prices.

UK construction

  • Net Zero Carbon Building Standard | A cross-industry steering group will develop a standard to verify UK buildings as net zero carbon.
  • Flexible space | IWG and Tesco announced a partnership that will launch a co-working workspace in Tesco’s New Malden store. It will provide 30 co-working spaces and a meeting room across 3,800sqft.
  • Life sciences | According to Knight Frank, up to five million sqft of office space in Cambridge and Oxford will be delivered within the next five years and life sciences accounted for 18% of total take-up in the South East in 2021.
  • Warehouses | Shares in Europe’s largest warehouse landlord have fallen 14% after Amazon announced that there is “too much space right now” after it added warehouse space throughout the pandemic.
  • Return of tenants | According to Hamptons tenants are flocking back to the capital. Residential rents in London have increased 12.3% in the last 12 months, the fastest rate since Hamptons started tracking in 2013, and outpacing the national average.
  • Contract awards | Barbour ABI data shows that contract awards and planning applications fell 33% from March levels and it suggests that this indicates a recession. However, the period also covers the Easter break and the local elections which often delays the sitting of planning committees.
  • Output | Total work reached a record high, but this was supported mainly by repair and maintenance work as all new work currently sits 1.5% below pre-pandemic levels with commercial work still 25% smaller despite a 4% monthly increase following storms in February which suppressed output.

UK economy

  • GDP fell 0.1% in March as the cost of living crisis began to encourage consumers to reduce their spending levels. Q1 2022 grew at 0.8%, slightly lower than economists had forecast.
  • Household support | The Chancellor is preparing to announce a major new support package for households as many struggle in the face of soaring energy bills. However, the announcement of the plans is rumoured to be in August, ahead of the next energy price cap increase in October.
  • Recession | In its latest Economic Outlook, the National Institute of Economic and Social Research (NIESR) has forecast a recession in the second half of this year. It suggests that it would be a minor recession, but warns that the government needs to do more to support households as the total number of “destitute households” will rise to 1 million. A single-person household is considered destitute when their income falls below £70 per week, with any additional adult requiring another £30 per week and a child needing £20 per week.

Global economy

  • Industrial production in the Euro area fell 1.8% between February and March 2022 and 0.8% on an annual basis. The data suggests that demand for heavy-duty machinery, vehicles, and tools fell.
  • China | Continued lockdowns are creating a drag on the economy. Property sales have fallen, unemployment is at its highest level since February 2020, and industrial output and retail sales have fallen 2.9% and 11.1% respectively.
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 7,418.15 0.41 5.32
FTSE 250 19,921.89 0.52 -10.81
Nikkei 26,427.65 -2.13 -5.90
CSI 300 3,988.60 2.04 -21.95
S&P 500 4,023.89 -2.41 -3.59
Nasdaq 11,805.00 -2.80 -12.10
CAC 40 6,362.68 1.67 -0.35
Dax 14,027.93 2.59 -9.01
$ per £ 1.2244 -0.84 -13.14
€ per £ 1.1761 0.71 1.29
Gold £/oz 1,475.75 -3.30 12.83
Brent Oil $/barrel 112.40 -0.64 63.59

Weekly Summary

Increasing costs, low growth, and high levels of uncertainty are encouraging many to look for signs of the next recession. Yet it still feels as if there are some pockets of optimism in some sectors and a willingness to improve the construction industry.

Several commodity prices appear to be settling (or beginning to settle), albeit at a higher price, yet there is still measurable volatility both in construction and in the wider market. Therefore, it is still necessary to track risks, the transfer of these risks, and look ahead for future risks that may arise in a slowdown.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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