Construction input inflation hits 24-year high

7 May 2021

Demand and supply imbalances pushed input cost inflation in the construction sector in April to its highest since 1997, according to the latest PMI. 

Steel, timber and transportation among the most commonly reported items up in price.

A rapid rise in demand for construction products and materials continued to stretch supply chains and supplier delivery times were the third-greatest since the survey began in 1997.

Firms blamed demand and supply imbalances, but some suggested  Brexit issues had caused delays to inputs arriving from the EU.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index posted 61.6 in April, just down from March's 61.7.

UK construction firms signalled a strong increase in output volumes during April, while workloads were boosted by the fastest rise in overall new orders since September 2014.

Total new work increased for the eleventh consecutive month in April, which contributed to the steepest rate of job creation across the construction sector since December 2015.

Commercial work was the best-performing category, while firms reported increased levels of work on major infrastructure programmes, including contract awards from HS2 and Highways England.

As a result, input buying expanded at the fastest pace since September 2014.

Duncan Brock, group director at CIPS, said: "The building blocks were in place in April as builders confirmed more work, more job opportunities and strong optimism for the next 12 months.

“Issues around supply chain performance acted as a drag on capacity however as supply constraints on essential materials increased to one of the third highest levels since 1997 when the survey began. Brexit issues remained a factor affecting deliveries from the EU and suppliers generally were struggling to meet the sudden rush in demand leading to shortages of basic materials."

Tim Moore, economics director at IHS Markit, added: “Shortages of construction materials and much longer wait times for deliveries from suppliers were a sting in the tail for the sector. Aggregates, timber, steel, cement and concrete products were all widely reported as in short supply by survey respondents.

"Supply and demand imbalances for construction items, alongside higher transport costs, resulted in severe price pressures across the board during April. The overall rate of input cost inflation reached its fastest since data collection began 24 years ago, exceeding the previous record seen at the top of the global commodity price cycle in 2008."

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