"moving in the right direction"

Economic Week In Review | Issue 429 | 13 May 2024

UK construction and property

  • Output | The construction sector output fell by 0.4% in March 2024, with new work falling by 0.7% and repair and maintenance by 0.1% as heavy rainfall delayed work. Infrastructure new work and non-housing repair and maintenance contributed the most to the fall. However, new orders increased by almost 16% in Q1 compared to Q4 2023. The annual rate of output growth was 1.5%.
  • Building safety | The Department for Levelling Up, Housing and Communities has won a case against a building owner for “unacceptable” delays in repairing multiple fire safety issues. Michael Gove has said that the case should serve “as a warning to all building owners”.
  • Prequalification process | Veriforce CHAS, an industry accreditation specialist, has called for mental health assessments of contractors to become part of the prequalification process and has launched a Mental Health and Wellbeing Question Set as a voluntary module.
  • Road bans | The Construction Plant-Hire Association (CPA) has written to Mark Harper, the Secretary of State for Transport, asking for more leniency in the rules on moving large plant and cranes on the UK’s roads. It accused the police of being too “stringent and inflexible” having informed one firm that they had infringed their movement order by 49 seconds.
  • Scottish port | A £100m credit boost has enabled construction to begin on the redevelopment of Ardesier port, near Inverness. Funding for the distribution hub is the first joint funding between the Scottish National Investment Bank and the UK Infrastructure Bank and follows £300m from US private equity firm Quantum Capital Group.
  • Hydrogen heating | The government’s offer to fund a pilot ‘hydrogen town’ project by 2030 has been withdrawn and will be reconsidered in 2026.

Global economy

  • Japanese bonds | 10-year government bonds rose to their highest levels in six months after its central bank announced plans to buy a smaller amount of debt (but still within its planned range), encouraging investors to think it will start to unwind its ultra-loose monetary policy.
  • Chinese debt sale | China has announced plans to sell $140bn of long-dated bonds with the People’s Bank of China asking brokers for advice on pricing the first batch of sovereign bonds.
  • China’s consumer prices rose for a third consecutive month whilst producer prices fell, suggesting an improvement in demand. Core inflation (excluding food and fuel) rose by 0.6% in April.

UK economy

  • Job vacancies | Concerns have been raised over the accuracy of data on the UK jobs market with thoughts that the number of vacancies may be overstated. The aggregate number of vacancies may be higher due to the lower cost of advertising for longer, which makes it difficult for the Bank of England to measure tightness in the labour market. Jobs deemed “hard-to-fill” on Indeed (those open for 60 days or longer) have risen from 20% of those listed pre-pandemic to 33%.
  • Takeovers | The value of bids for companies listed in London has reached the highest level since 2018, encouraged by lower share prices, which in turn have been driven by weakness in the UK economy. Analysts suggest that it shows interest rates have peaked and inflation has been tamed which will cause share prices to improve.
  • Recession | Latest figures show that the UK left a state of recession and returned to growth. GDP increased by 0.6% in Q1, the fastest quarterly growth since the end of 2021.
  • Interest rates | The Bank of England left the base rate unchanged. The Governor of the Bank of England said that he was “optimistic that things are moving in the right direction”. Whilst there could be a rate cut in June, he warned that it was “not a fait accompli”.
  • Fiscal rules | The National Institute for Economic and Social Research (Niesr) has warned that tax rises will be necessary after the next election unless fiscal rules on borrowing and debt are abandoned.
  • Business confidence | Accounting and business advisory firm BDO reported that business output and confidence rose in April to its highest level in nearly two years, as businesses are encouraged by consumer spending and easing inflationary pressures.

Materials and commodities

  • British Steel is nearing a taxpayer rescue. Jingye group has appointed PwC to help finalise a business plan and negotiations over state aid. The support would facilitate British Steel’s transition to lower-carbon products through an electric arc furnace.
  • Oil floor | The latest McClellan Market Report presents an analysis that gold prices adjusted forwards by 19.8 months can be compared to crude oil prices. The model suggests that prices are due to reach the bottom in mid-2024 before rising at the end of the year.

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 8,433.76 2.68 8.76
FTSE 250 20,645.38 2.38 7.59
Nikkei 38,229.11 -0.02 30.08
CSI 300 3,666.28 1.72 -6.89
S&P 500 5,222.68 1.85 26.64
Nasdaq 16,340.87 1.14 33.02
CAC 40 8,219.14 3.29 10.85
Dax 18,772.85 4.28 17.97
$ per £ 1.2526 -0.17 0.51
€ per £ 1.1628 -0.19 1.29
Gold £/oz 1,884.63 2.73 16.66
Brent Oil $/barrel 82.79 -0.05 11.62

Weekly Summary

Investors seem confident that conditions will continue to improve but crucially are waiting for interest rates to fall. Central banks have suggested that they will begin to move rates if inflation continues to slide, but inflation continues to be impacted by geopolitical events outside the control of central banks. The next few months will no doubt dictate the speed and scale of the recovery.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst

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