10 June 2004
Rising oil and steel prices pushed input cost inflation for UK builders to a record high in May.
According to the latest purchasing managers' index (PMI) from CIPS and NTC Research, the input price index stood at 75.7. An index of 50 indicates no change on the previous month.
The record high in oil prices and China's appetite for steel took the index to the highest since the survey began in 1997.
The seasonally adjusted PMI, a composite indicator of sector conditions, registered growth at 56.3, although the index fell for the second successive month.
Richard Harding, economist at NTC Research, said: "Shortages of certain raw materials, in particular steel, increased suppliers' pricing power, which in turn had an inflationary impact on input costs in May. This is likely to affect the construction industry's margins."
In spite of this, UK construction firms remained upbeat that activity will rise in the next year.
The PMI for manufacturers also showed an slight increase in May at 55.6. Output prices were up, but input prices rose even more quickly.
"Charges lag behind prices because strong competition reduces the rate of price inflation, increasing pressure on manufacturers' margins," said Harding.
In the services sector, the business activity index fell to 57.4. Amid the sector's generally healthy report, transport companies are grappling with rising fuel costs, while increasing labour costs are among the other reasons for a sharp rise in input prices.