Buyers scale up purchasing to beat expected price rises

Will Green is news editor of Supply Management
8 June 2022

Growth in UK construction hit a four-month low in May as subdued consumer confidence and worries about the economy constrained demand, according to the latest PMI.

Higher borrowing costs and intense inflationary pressures were also cited by survey respondents as factors holding back growth over the next 12 months.

However, supplier delays were the least widespread since February 2020 with firms reporting improved availability for construction materials despite logistics bottlenecks, Brexit trade friction and supplier staffing shortages.

There was a steep rise in total purchasing volumes, fuelled by efforts to replenish stocks and pre-purchase ahead of price rises.

Three-quarters (73%) of firms reported a rise in purchasing prices, linked to higher fuel, energy and raw material costs, but the overall rate of inflation eased to a three-month low.

The S&P Global/CIPS UK Construction Purchasing Managers’ Index dropped to 56.4 in May, down on 58.2 in April but still showing expansion above the neutral 50 reading.

Duncan Brock, group director at CIPS, said: “Supply chain managers scaled up purchasing levels to beat expected price increases in the months ahead as inflation rates remained powerfully strong even with the slight easing in prices. 

“There was also robust job hiring in May so businesses could secure the best talent from a dwindling pool of skilled candidates to build capacity for the remainder of the year. 

“Subdued client confidence affected new order levels with the slowest rise in pipelines of new work since December 2021. The housing sector in particular showed further signs of fragility with the worst performance since May 2020 and moving closer to the danger zone of negative territory.”

Tim Moore, economics director at S&P Global Market Intelligence, said: “New order volumes expanded at the slowest pace since the end of 2021, which added to signs that heightened economic uncertainty has started to impact client spending. 

“Concerns about the business outlook were signalled by a fall in construction sector growth projections to the lowest for more than one-and-a-half years in May. Around 19% of construction firms predict an outright decline in business activity during the year ahead, up from just 5% at the start of 2022.” 

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