Consistent improvement?

Economic Week In Review | Issue 450 | 7 October 2024

UK construction and property

  • Output | The latest S&P Global PMI for construction reported the fastest growth in sentiment for almost two and a half years as the index rose to 57.2 in September, up from 53.6. It marks the seventh consecutive month above the 50.0 marker for no change. Growth was seen in all sectors.
  • Stagnant | Contract monitor Glenigan claims that the construction industry is in a state of stagnation with project starts showing an overall fall. The value of work starting on-site has fallen 3% between the last two quarters and is 7% lower than a year ago. It also suggests that the industry is “on tenterhooks” as it awaits the Spending Review and that the sector is in a delicate position as highlighted by the collapse of ISG.
  • Infrastructure | The Transport Minister had been expected to decide whether the Lower Thames Crossing should be granted a Development Consent Order (DCO), but the decision seems to have been delayed.
  • UK Net Zero Carbon Building Standard | The pilot version of the new standard was launched and promised to overhaul the carbon credentials of real estate in the UK. It provides technical details on how buildings should meet the standard, limits, and targets.

Global economy

  • US election | A report by the non-partisan Committee for a Responsible Federal Government has warned of an increased risk of “an eventual fiscal crisis” if Donald Trump wins the electoral race. Its research found that Donald Trump would raise the US debt level by twice as much as Kamala Harris.
  • China | Schoolteachers and other public sector employees need to hand in their passports under a plan for “personal travel abroad management”. The initiative to reduce foreign travel for key personnel began in 2003 but has been tightened recently.
  • Dockworkers | US dockworkers will return to work after an agreement extended the International Longshoremen’s Association’s employment contract, which had expired. JPMorgan analysts estimated the strike could have cost the US economy $4.5bn a day.

UK economy

  • Business rates | Over 70 high street retailers have urged the Chancellor to make a 20% cut to business rates in her Autumn Budget later this month. The British Retail Consortium (BRC) has suggested a “retail rates corrector” on the tax, which would adjust business rates paid on retail properties.
  • House prices rose at their fastest rate since November 2022 according to Halifax. It is the third consecutive month of increases which the bank attributes to lower interest rates.
  • Pay growth increased at the slowest pace in almost four years as Britain’s job market showed more signs of cooling in September, according to the Recruitment and Employment Confederation and KPMG.

Materials and commodities

  • Steel protection | The UK’s steel industry lobby group, Steel UK, has called for protectionist measures ahead of a glut of output caused by excess material from China. It calculates that the global market is oversupplied by 543m tonnes of excess steel and that the UK faces a “cliff edge” in 2026 when current policies expire. China’s Baowu Steel – the world’s largest producer – says that the industry is going through a “harsh winter” that may be worse than the 2008 crash or the 2015 steel crisis.
  • Chipmaking | Hurricane Helene has caused flooding in North Carolina, US and affected the production of ultra-pure quartz, a key component in chip manufacturing. The mines in Spruce Pine produce 90% of the material.
  • Baked clay | HS2 is to trial using baked, repurposed London Clay as a low-carbon alternative to cement. The HS2 Skanska Costain STRABAG joint venture is working with Arup, Tarmac, the University of Leeds, Sika UK, Expedition Engineering, and the Mineral Products Association on the trial, funded by Innovate UK.
  • Builders’ merchants | The latest Builders Merchant Building Index (BMBI) reported that sales were 0.9% higher in July 2024 than a year ago but like-for-like sales were 7.9% lower. Volumes were 0.6% higher and prices were 0.3% up. Heavy building materials and timber and joinery products (the two largest categories) were flat.
  • Material prices have continued to decline in August. The Department for Business and Trade (DBT)’s index of material price inflation was down 0.3% from July and 1.1% from the year before. The largest price falls were in the non-housing new-build market with costs sinking by 0.6% over the month prior and 2.1% in the year. It’s important to note while prices of materials have dropped some materials like flexible pipes and fittings experienced price rises growing by 17.4% in the year to August the most of all materials tracked by the DBT.
  • Port Talbot | Blast Furnace 4 (the final operating furnace at Tata’s steel plant in Port Talbot) has finally been closed marking the end of traditional steelmaking in Wales. Tata Steel is replacing the furnace with a greener arc furnace, but it will not be operational until 2028. 
  • Oil | The price of oil has risen following US President Joe Biden’s comment that attacks on Iran’s oil facilities were “being discussed”. The Brent crude oil benchmark has risen more than 10% to $78 a barrel, although the price remains below levels seen earlier this year. Iran is the world’s seventh-largest oil producer exporting almost 50% of its production abroad, mainly to China. 
  • Metals | China’s recent economic stimulus measures pushed copper and aluminium prices upwards, with copper up 0.5% to $9,880 a metric ton and aluminium rising 0.7% to $2,630 a metric ton on the London Metal Exchange (LME). The price hikes in metals are largely due to China’s economic stimulus and a global push for a green energy transition.

Environment

  • Carbon capture | The UK government has pledged £22bn in funding for carbon capture and storage projects. Three sites have been identified with five more suggested. The funding will be stretched over 25 years and will support two undersea carbon storage sites for 8.5 million tonnes of carbon dioxide. Two carbon capture clusters on Teesside and Merseyside promise to create 4000 jobs.
  • Typhoon Krathon reached super typhoon status and forced Taiwanese schools, offices, and financial markets to shut down for multiple days and international flights to be cancelled. On Tuesday a cargo vessel ran aground near Taiwan’s Lanyu island, where there appeared to be oil leaking from the ship which was carrying 67,000 tonnes of iron ore and 227 tonnes of fuel oil, according to Taiwan’s coastguard.  

Friday to Friday

Price / Index Week %
change		 Annual %
change
FTSE 100 8,280.63 -0.48 10.49
FTSE 250 20,900.08 -1.60 17.86
Nikkei 38,635.62 -3.00 24.65
CSI 300 4,017.85 8.48 9.04
S&P 500 5,751.07 0.22 33.48
Nasdaq 18,137.85 0.10 35.04
CAC 40 7,541.36 -3.21 6.82
Dax 19,120.43 -1.81 25.55
$ per £ 1.3105 -2.16 6.94
€ per £ 1.1957 -0.39 3.38
Gold £/oz 2,021.56 1.70 34.96
Brent Oil $/barrel 78.08 8.47 -7.69

Weekly Summary

Many of the economic indicators we track have shown consistent growth over the past few months, with the S&P construction PMI making significant gains this month after several months of improvement. However, current data suggests that the economy is losing momentum in the second half of the year, a change which was not unexpected in the second half of the year as the Spending Review slows public spending and places more of a focus on business and consumer activity.

Author contact

Rachel Coleman
Rachel Coleman,
Associate Research Analyst
Kishan Patel
Kishan Patel,
Research Analyst

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