Economic Week In Review | Issue 338 | 18 July 2022
Materials and commodities
Currency | The Euro has fallen to parity with the US dollar for the first time in twenty years. The dollar is often seen as a safer option in times of stress and analysts suspect the increasingly bleak economic outlook has driven the move.
Rebar dumping | The Trade Remedies Authority has suggested ending restrictions on Chinese rebar which have been in place since 2016. The industry British Association of Reinforcement called the plans “utter madness” especially because of the increased carbon from importing from China.
Rio Tinto has warned that labour shortages, low demand from China, falling commodity prices and the threat of recession are creating “considerable” headwinds despite its iron ore production in Australia significantly increasing.
Building materials | Producers expect slowing sales in the coming months as confidence falls due to high inflation levels according to the Construction Products Association’s latest survey. Heavyside producers expect sales to fall in the third quarter. Half of firms expect sales to fall by 5%, having reported an eighth consecutive quarter of sales growth.
UK construction and property
Later living | JLL has forecast the later living sector to grow by £2.65bn in the next five years, with a large increase in rental properties. Yorkshire and The Humber and London will see the largest increases.
Converted offices | According to Zurich UK, office-to-resi conversions could create homes which are unfit for future climate conditions. The Climate Change Committee has warned that overheating in homes is in the top eight risks to people in the UK from climate change which the recently updated Building Regulations seek to address in Part O.
Schools programme | The government announced the third wave of school projects to win funding, with a list of 61 schools across the country.
Profit warnings | The number of profit warnings by FTSE-listed construction and material companies in the first half of this year matched the current record low, according to a recent report by EY-Parthenon. Only 8% of firms have issued a warning.
House prices | Halifax’s index showed house prices reaching a new record in June with the average house price increasing 1.8% – the steepest monthly increase since 2007.
Inflation | Build UK issued guidance on how to manage cost inflation, which was written in partnership with Wedlake Bell LLP.
Strikes | UK train drivers will strike over pay. It is the first coordinated industrial action taken by drivers in 27 years.
Return to growth | The UK economy grew 0.5% in May after its 0.2% contraction in April.
Economic strategy | Three reports (Resolution Foundation, Treasury Select Committee and the National Audit Office) this week outlined the need for a change in the UK’s economic strategy, stating that tax cuts will not be enough. Productivity and investment challenges need to be addressed, particularly investment and support from central government.
Fuel | According to the International Energy Agency, record fuel prices are impacting demand for oil in advanced countries more than expected. Road fuels are the most affected. An EU embargo on Russian oil is expected to come into force at the end of the year.
China’s GDP grew 0.4% at an annual rate in Q2, below the rate of 1.2% expected by economists and much lower than the 4.8% recorded in Q1.
Chinese real estate | Homebuyers are refusing to pay mortgages in 22 cities due to project delays and a drop in real estate values. In Zhengzhou 28% of housing units have delivery issues.
US inflation increased to 9.1% in June, a 40-year high. Core inflation, which excludes food and fuel, was 5.9%.
Japan will restart its nuclear reactors due to concerns over a winter power shortage.
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
In a week where we are expected to see temperature records broken, the warning on ensuring that homes are fit for purpose now and in the future seems all the more pertinent. It should also serve as a reminder that despite current stresses and strains, the economy and the construction industry, in particular, should stay focussed on sustainability targets.
Over the last couple of years, the construction industry has developed more of a collaborative working environment. It’s great to see Build UK promoting a collaborative approach to managing cost inflation. We believe that a team approach to understanding not just the cause (and impacts) of inflation, but also the possible mitigation strategies will be crucial over the coming period.
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