The construction industry expanded last month at its weakest pace since February as shortages of building materials and contractors weighed on output, a key survey has suggested.
The IHS Markit/CIPS construction purchasing managers’ index fell from a 24-year high of 66.3 in June to 58.7 in July. This was the weakest reading since February and the sharpest monthly drop since the country first went into lockdown in April last year.
Although the index was above the 50 mark that separates growth from contraction, economists had expected a much stronger figure of 64.
“Long lead times for materials and shrinking sub-contractor availability were cited as factors holding back work on-site,” Tim Moore, IHS Markit’s economics director, said. “Two thirds of the survey panel experienced longer wait times for supplier deliveries in July, while just 2 per cent reported an improvement since the previous month.”
The findings add to evidence that the economy is struggling to meet a rapid rise in demand as the country emerges from lockdown. Supply bottlenecks, higher commodity prices and staff shortages are also plaguing the manufacturing and services sectors and this is creating inflationary pressure.
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Consumer prices have risen above the Bank of England’s 2 per cent target and the central bank expects the headline rate to peak at 4 per cent before falling back gradually. Supply chain problems have been particularly acute in the car industry, where production has been held back by a shortage of semiconductors and by staff self-isolating.
New figures show that new car sales fell by a third in July to their lowest level since 1998. Registrations fell by 29.5 per cent to 123,296 vehicles, according to the Society of Motor Manufacturers and Traders, which called the figures “disappointing”. The July performance was down 22.3 per cent on the average over the past decade, as the semiconductor shortage and the “pingdemic” affected supply and demand.
Mike Hawes, chief executive at the motor trade body, said: “The sector continues to battle against shortages of semiconductors and staff, which is throttling our ability to translate a strengthening economic outlook into a full recovery. The next few weeks will see changes to self-isolation policies, which hopefully will help those companies dealing with staff absences, but the semiconductor shortage is likely to remain an issue for the rest of the year. We have downgraded the market outlook slightly for 2021.”
