Supply chain managers build stocks against 'gloomy outlook'

Will Green is news editor of Supply Management
6 May 2022

Business optimism in the construction sector hit a 19-month low in April amid high inflation and risk aversion among clients, according to the latest PMI.

Higher prices for energy, fuel and raw materials led to a steep rise in average cost burdens, with the overall rate of purchasing price inflation the highest since September 2021.

The S&P Global/CIPS UK Construction Purchasing Managers’ Index slipped to 58.2 in April, down on 59.1 in March and against the no-change reading of 50.

Total new orders expanded at the slowest rate for four months, with inflation, higher borrowing costs and geopolitical uncertainty reported as headwinds to demand.

Suppliers continued to struggle to keep up with demand for construction products and materials, with 45% of the survey panel reporting longer lead times.

Duncan Brock, group director at CIPS, said: “To counteract some of these challenges and with an eye on the future, supply chain managers were building stocks, resulting in another sharp rise in purchasing activity. 

“Inflation hit the highest rate since September 2021, impacted on budgets and made customers think twice about committing. 

“Job creation grew quickly to complete work in hand, risking over-inflating capacity should new order growth slow further.

“With the Bank of England confirming the interest rate as the highest for 13 years, the squeeze on business lending also led to a relatively gloomy outlook amongst builders for the year ahead, with sentiment the lowest since September 2020.”

Tim Moore, economics director at S&P Global, said: “The construction sector is moving towards a more subdued recovery phase as sharply-rising energy and raw material costs hit client budgets.”

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