Cars, construction and housing all on the up -- but inflation worries grow

Chancellor Rishi Sunak has inflation concerns

(PA Wire)

THE construction sector is booming, car sales are racing back, and central Londonhouse prices are rising for the first time in five years in the latest signs that the UK economy is heating up.

Today’s raft of economic news is all positive, though the spectre of inflation lurks in the data.

New construction orders are up at the fastest rate since April 1997, with house building in particular soaring. The IHS/Markit CIPS index for May is at 64.2, up from 61.6 in April, with any number above 50 showing growth.

Duncan Brock at the Chartered Institute of Procurement & Supply said: “The construction sector continued its expansion programme with a phenomenal acceleration in growth.”

In other news:

** House prices in prime central London grew by 0.3% in the year to May, which compared to 3.1% in prime outer London. Wimbledon saw price growth of 9.4% in the year to May, the strongest of all London markets.

Tom Bill at Knight Frank said. “Things are picking up where they left off after the general election in December 2019 and buyers can recognise good value after five or six years of falling prices.”

** New car registrations rose by 674% in May with 156,737 vehicles sold, compared to the same month last year when showrooms were closed.

Seán Kemple of Close Brothers Motor Finance said: “New car sales are finally catching up to pre-pandemic levels as forecourts reopen and hopes rise for a solid economic recovery.”

** British employers took on permanent staff last month at the fastest rate since records started being kept in the late 1990s.

Growth in temporary staff placements also hit a six-year high, according to the Recruitment and Employment Confederation (REC) trade body and accountants KPMG.

Kate Shoesmith, REC deputy chief executive officer, said: “We now have a consistent picture over the past few months to show that confidence is growing and hiring plans are in motion.”

Inflation is a growing worry, however, filtering into nearly all sectors at what some economists regard as a worrying rate. Chancellor Rishi Sunak is also known to be concerned.

The construction and manufacturing sector are fighting a shortage of materials. There is a microchip crisis that is sending tech prices higher.

Yesterday the UN said food prices are rising at their fastest monthly rate for a decade.

Richard Hunter, Head of Markets at interactive investor, said: “The welcome return to economic growth continues to be tempered by fears of rising prices, as elements of supply and demand remain out of kilter.”

This week Government statistics showed there were still 3.4 million people furloughed at the end of April - after hospitality reopened outdoors.

On April 30 the “beverage serving activities” category was still the sector with the highest take-up rate for furlough, with 70% of eligible staff still not working.

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