Issue 275 12 April 2021 - Turner & Townsend alinea

Economic Week In Review | Issue 275 12 April 2021

Property and construction news

Output | PMI rose at the fastest rate for more than six years, increasing to 61.7 in March, up from 53.3 in February. Housebuilding, commercial and civil engineering all saw growth, though some respondents commented on the number of restarted projects, particularly in hospitality, leisure, and office development. Concerns were raised over product waiting times and price increases.
Product shortages | The CLC’s product availability workgroup (chaired by members of the Builders Merchants Federation and the Construction Products Association) warned that the shortage of materials such as timber, steel, and screws is likely to get worse before it gets better due to increasing global demand.
Lost rent | Research by Remit Consulting found that the last 12 months of Covid have cost commercial landlords £5.34bn in lost rent. It is unclear whether businesses will be able to pay the backlog which has built up during the pandemic.

Materials and commodities

Steel in the EU | Italy and is considering extending state protection against foreign ownership in the steel and automotive sectors in an effort to shield businesses from Chinese interest. The EU has been toughening its stance on China recently.
Steel in Russia | Russia is looking to introduce measures to limit a rally in steel prices which have reached decade-high levels. One measure being explored is taxing sales over a certain price.
Shipping costs | Fitch Ratings warned that global shipping bottlenecks will continue to keep shipping costs high. World trade has recovered faster than expected and freight costs have soared since November with some routes increasing fourfold. These bottlenecks are expected to ease in the second half of 2021.

UK news

UK savings | UK households have amassed nearly £180bn in savings over the last year as spending opportunities were curtailed. This is equivalent to nearly 10% of the UK’s annual GDP. There are opposing views as to how happy people will be to spend these savings.
Foreign takeovers | Business secretary Kwasi Kwarteng is looking to introduce new legislation on foreign takeovers to ensure that rules do not deter foreign investors. A key change is that the ownership stake at which the government needs to be informed of a takeover will be increased from 15% to 25%.
Business confidence hit a record high amongst big businesses due to Covid-19 vaccine success and fewer Brexit concerns. The survey by Deloitte shows that CFOs expect a strong recovery in profits over the next year as workers return to the office between July and September bringing and only 3% expect disruption to persist into next year.

Global news

Global recovery | The IMF has upgraded its January forecasts for the world economy but warned that recoveries are diverging dangerously within and between countries. The Fund now expects global growth to rise 6% this year (previously 5.5%).
Italy | Prime Minister Mario Draghi is planning to borrow €40bn to support the economy. The government has spent €130bn so far and pushed public debt to 155.6% of GDP.
Eurozone construction returned to slight growth after 12 months of falling output. PMI grew from 45.0 in February to 50.1 in March. The survey showed that appetite for new construction projects, particularly in the public sector have increased workloads.

Tender Price Index

Published every six months, our Tender Price Index is an analysis of inflation price deviation in construction prices. Click on the link above to view our most recent Index.

Friday to Friday

	Price / Index	Week % change	Annual % change
FTSE 100	6,915.75	2.65	18.37
FTSE 250	22,251.26	2.39	35.61
Nikkei	29,768.06	1.29	53.87
CSI 300	5,035.34	-1.48	32.76
S&P 500	4,128.80	2.71	48.00
Nasdaq	13,900.19	3.12	70.48
CAC 40	6,169.41	1.09	36.89
Dax	15,234.16	0.84	44.20
$ per £	1.3734	-0.63	10.31
€ per £	1.1526	-1.93	1.19
Gold £/oz	1,272.16	1.71	-5.87
Brent Oil $/barrel	62.95	-2.94	99.97

Weekly Summary

This week marks the first large roll-back of covid restrictions in the UK since December as non-essential retailers and leisure facilities can reopen (albeit with some restrictions) so it is understandable that confidence saw a boost this week.

This optimism isn’t without caution. The world’s recovery is very imbalanced, even within sectors or areas of the UK and this will continue to create supply issues for a variety of goods for some time. The latest release from the CLC’s product availability group serves as a timely reminder of the various pressures building in the construction market. As these shortages play out and demand increases (in both construction and the wider economy), we will be keeping an eye on our own construction basket of goods together with the wider implications for the construction market.