By David Milliken
LONDON – Activity in Britain’s construction industry grew last month at its weakest pace since February due to shortages of building materials and contractors, adding to signs of post-COVID bottlenecks in the economy.
The IHS Markit/CIPS construction Purchasing Managers’ Index (PMI) fell from June’s 24-year high of 66.3 to 58.7 in July. This was the PMI‘s lowest reading since February and the sharpest single-month drop since April 2020, Britain’s first full month of COVID lockdown.
While the PMI still points to solid growth in the sector, economists polled by Reuters had expected a much smaller slowdown to a reading of 64.0.
“Long lead times for materials and shrinking sub-contractor availability were cited as factors holding back work on site,” IHS Markit’s economics director, Tim Moore, said.
Some construction firms also reported that a spike in demand when lockdown restrictions first eased earlier in 2021 was now beginning to wane.
Separate data released overnight by the Royal Institution of Chartered Surveyors painted a similar picture of supply constraints, including growing shortages of bricklayers, carpenters and quantity surveyors.
Britain’s economy is bouncing back rapidly this year after suffering its biggest fall in output in more than three centuries in 2020.
But there has been a sharp rise in inflation pressures due to a mix of higher oil prices and supply-chain bottlenecks as the world economy emerges from months of lockdowns.
The Bank of England is expected to revise up its forecasts for inflation later on Thursday, and some economists see British inflation – currently 2.5% – hitting a 10-year high of about 4% around the turn of the year.
The BoE, like most other central banks, expects this spike in inflation to ease next year once the initial effects of lifting lockdowns have passed.
The construction PMI pointed to big inflation pressures in the pipeline, as construction firms’ costs grew only slightly less fast than the 24-year high recorded in June.
“Supply imbalances were amplified by a lack of transport availability, port congestion, and Brexit trade frictions,” IHS Markit said.