CONSTRUCTION is booming, car sales are racing back, and central London house prices are rising for the first time in five years in the latest signs that the UK economy is heating up.
Today’s whirlwind of economic news is all positive, but 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, from 61.6 in April, with any number above 50 showing growth.
The increase in work on commercial projects was the steepest since August 2007, job creation hit its fastest level since July 2014 and the use of sub-contractors reached record levels.
Tim Moore, of IHS Markit, said: ”UK construction companies reported another month of rapid output. Total new orders increased at the strongest rate since the survey began more than two decades ago, but supply chains once again struggled to keep pace with the rebound in demand.”
It came as:
• House prices in prime London grew by 0.3% in the year to May, the first rise since the Brexit vote. Wimbledon saw prices up 9.4% in the year to May.
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% year-on-year with 156,737 vehicles sold.
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 at the fastest rate since records started 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 KPMG.
Kate Shoesmith, REC deputy chief executive officer, said: “We 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 concern, however, filtering into nearly all sectors at what some regard as a worrying rate.
The construction and manufacturing sectors are fighting a shortage of building materials. There is a microchip crisis that is sending tech prices higher.
Duncan Brock, of the Chartered Institute of Procurement & Supply, said there had been “phenomenal acceleration” in construction, adding: “with inflation for goods and raw materials at a 24-year high, companies will be concerned that profits will be eaten away.
“Skills shortages are also becoming a problem, with recruiters finding talented labour hard to find..”
Richard Hunter, of interactive investor, said: “The welcome return to growth is tempered by fears of rising prices, as elements of supply and demand remain out of kilter.” Gareth Belsham, of Naismiths, said demand has gone from “hot to white hot.”