UK housing activity rises at quickest pace since September 2022
Newsflash: Growth in Britain’s housebuilding sector has hit its highest rate since the mini-budget almost two years ago.
Data provider S&P Global has reported that UK residential construction work “gained momentum” in August, with growth accelerating to its fastest since September 2022.
This increase in housebuilding was due to “improving market conditions” and lower borrowing costs, S&P Global says.
However, civil engineering growth slowed last month, which pulled the overall construction PMI down to 53.6 in August, down from July’s 26-month high of 55.3.
Tim Moore, economics director at S&P Global Market Intelligence, says:
“The UK construction sector appears to have turned a corner after a difficult start to 2024, with renewed vigour in the house building segment the most notable development in August. Residential work expanded at the fastest pace for almost two years as lower borrowing costs and a gradual recovery in market conditions helped to boost activity.
Commercial building was the best-performing part of the construction sector as the improving UK economic backdrop resulted in stronger order books, but the postelection bounce in demand faded somewhat in August.
Borrowing costs jumped after the September 2022 mini-budget, driving up mortgage rates and making it harder for buyers to get a home loan. Mortgage rates have been dropping this summer, as the City anticipates more interest rate cuts from the Bank of England.
The Labour government has pledged to “get Britain building again” by bringing back compulsory housebuilding targets, and to build 370,000 homes a year during the course of the current parliament.
Key events
Unions at Volkswagen could propose a four-day week, to avoid factory closures and job cuts at the German carmaker.
Christiane Benner, chair of the IG Metall union, has said it is “conceivable” that it could propose a four-day week, saying:
“We will leave no idea unexplored.”
But Benner cautioned that it is impossible to lay out detailed proposals without more information on what solutions VW is proposing, saying:
“We need forward-thinking ideas on where potential can be found. VW has survived difficult situations before.”
Yesterday VW told staff that it is considering shutting two German factories, in what would be the carmaker’s first closures ever in its home country.
Ireland on brink of technical recession
Newsflash: Ireland’s economy is on the brink of recession, by some measures, after activity shrank in the second quarter of this year.
New estimates from Ireland’s Central Statistics Office show that Ireland’s gross domestic product (GDP) fell by 1.0% in the April-June quarter. That’s down from an initial estimate of 1.2% growth in the quarter.
GDP isn’t a great measure of Ireland’s economy, though, as it can be distorted by multinational firms based in the Republic.
Modified Domestic Demand (MDD), a broad measure of underlying domestic activity that covers personal, government, and investment spending, also shows a decline. It decreased by 0.5% in Q2 2024.
However, Gross national product (GNP) – which measures the total value of goods and services produced by a country in one year, including profits made in foreign countries – rose by 3.3% in the quarter.
This puts Ireland on the edge of a technical recession – defined as two quarterly contractions in a row. In Q1, GDP rose by 0.9% while MDD inceased by 1.4%.
The CSO reports that Ireland’s domestic sectors contracted by 1.8% in the April-June quarter with the multinational-dominated sectors declining marginally by 0.1%.
Assistant Director General with responsibility for Economic Statistics, Chris Sibley, says:
“In today’s results, Gross Domestic Product (GDP) is estimated to have fallen by 1.0% in April, May, and June (Q2) 2024.
The globalised Industry sector fell by 0.7% in Q2 2024 compared with Q1 2024 while the Information & Communication sector posted a decrease of 0.9% over the same period.
Overall, the combined multinational-dominated elements of the Industry and Information & Communication sectors declined by 0.1% in the quarter. These sectors accounted for 43.9% of total value added in the economy, compared with a 56.1% share for all other sectors.
Labour’s election success in early July could have boosted activity in the commercial building sector last month.
Today’s PMI report says:
Commercial activity was the best-performing segment, despite the pace of growth slipping to its lowest since March. A number of firms noted a boost from rising sales enquiries and the release of new orders following the general election.
S&P Global adds that respondents to its PMI survey said improving economic conditions and greater domestic political stability had lifted customer demand, leading to an increase in orders last month.
The Labour government’s housebuilding push should help the recovery in housebuilding to strengthen, predicts the EY ITEM Club.
EY ITEM Club say that housebuilders should feel more confident about starting projects, as housing transactions and prices have started to recover and the government has made housebuilding a key priority.
Peter Arnold, EY UK chief economist, says:
House prices and transactions have passed the bottom and are starting to recover, which will bolster firms’ confidence in building.
The new government’s focus on housebuilding as a key pillar of its growth plan is also likely to be supporting confidence, although capacity constraints, particularly in terms of the availability of staff with the appropriate skills, will need to be overcome.”
UK housebuilding accelerated last month thanks to the ongoing economic recovery, and lower borrowing costs, explains Thomas Pugh, economist at RSM UK.
Pugh adds:
Mortgage approvals jumped in July and annual house price growth picked up as well, clear signs of a revival in the housing market.
Pugh points out that the future activity index and new orders measures within the PMI are still high indicating optimism in the industry, adding:
“What’s more, there was further good news for policy makers as the input prices balance dropped, suggesting that price pressures are easing in the construction sector as well as the services and manufacturing sectors. That bodes well for interest rate cuts later this year.
Although UK housebuilding activity picked up last month, hiring across the construction sector did not.
Staffing levels were broadly unchanged, according to the purchasing managers surveyed for today’s construction PMI report. That ends a three-month period of expansion.
Firms also cut back on sub-contractor usage, for the first time since January.
Some firms noted that elevated wage pressures had led to delays with staff hiring, while others commented on a lack of candidates to fill vacancies. S&P Global explains.
UK housing activity rises at quickest pace since September 2022
Newsflash: Growth in Britain’s housebuilding sector has hit its highest rate since the mini-budget almost two years ago.
Data provider S&P Global has reported that UK residential construction work “gained momentum” in August, with growth accelerating to its fastest since September 2022.
This increase in housebuilding was due to “improving market conditions” and lower borrowing costs, S&P Global says.
However, civil engineering growth slowed last month, which pulled the overall construction PMI down to 53.6 in August, down from July’s 26-month high of 55.3.
Tim Moore, economics director at S&P Global Market Intelligence, says:
“The UK construction sector appears to have turned a corner after a difficult start to 2024, with renewed vigour in the house building segment the most notable development in August. Residential work expanded at the fastest pace for almost two years as lower borrowing costs and a gradual recovery in market conditions helped to boost activity.
Commercial building was the best-performing part of the construction sector as the improving UK economic backdrop resulted in stronger order books, but the postelection bounce in demand faded somewhat in August.
Borrowing costs jumped after the September 2022 mini-budget, driving up mortgage rates and making it harder for buyers to get a home loan. Mortgage rates have been dropping this summer, as the City anticipates more interest rate cuts from the Bank of England.
The Labour government has pledged to “get Britain building again” by bringing back compulsory housebuilding targets, and to build 370,000 homes a year during the course of the current parliament.
Petrol and diesel pump prices fall to lowest in nearly three years
Good news for motorists who haven’t made the switch to electric vehicles – fossil fuel costs have hit a near three-year low.
Motoring body the AA reports that the average price of petrol dropped to 139.5p a litre yesterday, the lowest since October 2021.
Diesel yesterday fell to 144.2p a litre, on average, also the lowest since October 2021 – a few months before Russia’s invasion of Ukraine sent energy costs soaring.
The AA says the 5p fuel duty cut made in the March 2022 budget helped push price down.
Edmund King, AA president, warned the government against removing the cut in this October’s budget – something that is reportedly under consideration.
King says:
“Pure and simple, the only reason why pump prices are at a three-year low this week is because of the 5p fuel duty cut. Removing it threatens to send millions of low-income drivers back into the era of ‘perma-high’ road fuel prices.
However, the freeze in fuel duty does cost the Treasury billions of pounds per year, as these posts show:
SMMT: UK on track to miss Zero Emission Vehicle Mandate for EV sales
So far this year, the market share held by battery electric cars (BEVs) has risen to 17.2%, up from 16.5% in 2023.
The SMMT expect it to rise to 18.5% by the end of the year thanks to increasing model choice – with some 364,000 BEVs registrations forecast for the year.
But, that means the UK would miss the goal that 22% of each carmaker’s sales must be pure battery cars in 2024, laid out in the Zero Emission Vehicle Mandate (as the industry warned last month).
The SMMT says “urgent action is needed”, including binding targets on public chargepoint provision and the reintroduction of incentives to encourage private buyers to go electric.
Mike Hawes, SMMT chief executive, says:
August’s EV growth is welcome, but it’s always a very low volume month and so subject to distortions ahead of September’s number plate change.
The introduction of the new 74 plate, together with a raft of compelling offers and discounts from manufacturers, plus growing model choice, will help increase purchase consideration and be a true barometer for market demand. Encouraging a mass market shift to EVs remains a challenge, however, and urgent action must be taken to help buyers overcome affordability issues and concerns about chargepoint provision.
UK car sales dip in August, BEV sales rise
Newsflash: UK car sales fell in August, ending a 24-month run of growth.
Industry body SMMT reports that new car registrations dipped by 1.3% last month, to 84,575 units.
August is traditionally a snoozy month for car dealers, as many buyers preferring to wait for September’s new number plate (or are busy on holiday instead!).
This time, fleet purchases (companies buying cars for their business) fell by 1.2% while sales to private buyers were 0.2% higher. Business registrations sank by nearly a third to just 1,136 units.
There are some interesting trends among the types of cars being bought.
Registrations of electric cars (Battery electric vehicles or BEVs) jumped by 10.8%. This lifted the BEV market share to 22.6%, the highest for a month since December 2022.
The SMMT says this is due to “heavy discounting by manufacturers over the summer and a raft of new models attracting buyers.”
Petrol sales fell 10.1%, while diesel dropped by 7.3% – but together made up 56.8% of all new registrations in August.
Plug-in hybrid (PHEV) registrations declined by 12.3%, but hybrid electric vehicle (HEV) uptake increased by 36.1%.
Yesterday, Volvo Cars abandoned its target of sell only electric cars by 2030, citing “changing market conditions and customer demands.”
We’ve covered plenty of bad economic news from Germany recently, with its economy shrinking in April-June and carmaker Volkswagen considering factory closures.
So it’s a relief to have some good news from Europe’s largest economy.
German factory orders rose by 2.9% month-on-month in July, statistics body Destatis reported this morning, smashing forecasts of a 1.5% fall.
This is “a rare piece of good news for the country’s important manufacturing sector,” say analysts at Saxo.
However…. the figures are flattered by some large orders, such as aircraft, ships, trains, and military vehicles.
Strip those out, and industrial orders were 0.4% lower than in June.