The Consumer Price Index (CPI) measure of inflation rose to 1.2% in November, up from 0.9% in October, the highest rate since October 2014.
The alternative Retail Price Index (RPI) measure which includes mortgage payments; rose from 2% in October to 2.2% in November. The Bank of England expects inflation to continue to rise during 2017 and remain above the 2% target until 2020, leading many commentators to predict interest rate rises by the end of the year.
Increases in the cost of fuel, food, clothing and imported goods were behind the higher than expected rise.
Forecasts for output are broadly flat in 2017 declining into 2018. The latest Construction Products Association (CPA) Forecast reflects the lag in new orders following a pause of investment activity around the Brexit mechanism. Commercial offices are set to decline 3% in 2017 and 10% in 2018. The industrial sector is forecast to decline 2% in 2017 with retail warehousing holding up demand.
Infrastructure is the driving sector with confirmed investment stimulating increases in output of 6.2% in 2017 and 16.2% in 2018. Public sector investment in education is also forecast to generate 5.8% increase in output in 2018.
Residential has seen some growth in the last quarter of 2016 but is forecast to fall 2% in 2018 after a flat 2017.
Every quarter we undertake an extensive survey of our workload and live market tenders received to establish any movement in tender pricing. Our research department correlates this with our in-house indices which, when overlaid on Macro Economics and Output projections, allows us to establish trends and forecasts.
This is further corroborated by our external Contractor Market Survey, where we gain insight of specific issues affecting specialist trades pricing and procurement through selective questioning of contractors.
Gardiner & Theobald is fortunate to work across a wide range of projects in various sectors of the UK Construction Industry providing us with a unique range of raw data upon which our research team can base their forecasts.