May 7, 2021
Surging commodity prices, strong demand, and strained logistics networks are pressuring construction costs
UK Construction companies reported a strong increase in output volumes in April for civil engineering activity, commercial work, and house building. Companies remain very optimistic on the outlook, with 57% of respondents expecting continued activity growth over the coming 12 months.
Higher prices paid for a wide range of construction items contributed to the fastest overall rate of cost inflation since the survey began in April 1997 (index at 84.6, up from 77.8 in March). Steel, timber and transportation were among the most commonly reported items up in price.
Tim Moore, Economics Director at IHS Markit, stated "Shortages of construction materials and much longer wait times for deliveries from suppliers were a sting in the tail for the sector. Aggregates, timber, steel, cement and concrete products were all widely reported as in short supply by survey respondents."
Increased cost inflation is a common theme for companies across the globe. US companies are reporting very similar cost pressures amid strong demand.
"Supply and demand imbalances for construction items, alongside higher transport costs, resulted in severe price pressures across the board during April. The overall rate of input cost inflation reached its fastest since data collection began 24 years ago, exceeding the previous record seen at the top of the global commodity price cycle in 2008," stated Moore.