Input Costs

Building cost indicators recorded further increases in the first quarter of 2018, through a combination of new year price rises and pass through of sterling depreciation on restocking.

General building costs rose at a slower rate than those of mechanical and electrical components, but both recorded 1.5% and 2.9% respectively higher costs than the first quarter a year ago.

In April aluminium prices rose to their highest level in three years due to impending sanctions from the US government on Russia, which produces a significant portion of the world’s aluminium. Sanctions are still being clarified and volatility is to be expected in market pricing which could impact component costs, however costs have returned to pre sanction levels for now.

Fuel oils rose further in the quarter to over US$75bbl recorded in April, as sanctions are imposed on Tehran following the US nuclear deal fallout.

Labour Rates

Average weekly earnings increased at a rate of 2.9%, the first time in more than a year that the rate of increase was higher than headline inflation at 2.5%.

This growth in real wages will benefit consumer demand, but will take a more sustained period of increase to ensure more resilience to compound overall demand, which could be difficult given the public sector 1% cap.

Construction rates of pay have fallen back in the period and are now at parity with average weekly earnings at 2.9% annualised.

Unemployment

The UK unemployment rate fell in the three months to March to 4.2%, the lowest level since 1975. The number of people recorded in work increased by 197,000 to 32.3 million, with 75.6% of people aged from 16 to 64 now in work.