Britain's construction industry grows at its weakest pace since February

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Britain's construction industry grows at its weakest pace since February

LONDON - Activity in Britain's construction industry grew this month at its weakest pace since February, due to shortages of building materials and contractors, adding to signs of post-COVID bottlenecks in the economy.

The IHS Markit CIPS construction Purchasing Managers' Index fell from the May 24 - year high of 66.3 to 58.7 in July. This was the PMI's first reading since February and the lowest month drop since April 2020, Britain's first full month of COVID lockdown.

While the PMI still shows solid growth in the sector, economists polled by Reuters had expected a much smaller slowdown to a reading of 64.0.

Long lead times for materials and shrinking sub-contractor availability were cited as factors holding work on site, said IHS Markit's economics director Tim Moore.

Some construction firms also reported that a spike in demand when lockdown restrictions first eased in 2021 was now beginning to wane.

Separate data released overnight by the Royal Institution of Chartered Surveyors showed a similar picture of supply constraints, including growing shortages of bricklayers, carpenters and quantity surveyors.

This year the economy is booming after suffering its largest fall in output in more than three centuries in 2020, to revive itself.

However, there has been a sharp rise in inflation pressures due to a mix of higher oil prices and supply-chain bottlenecks as the world economy emerges from months of lockdowns.

The Bank of England is expected to revise its inflation forecasts later on Thursday, and some economists see British inflation - currently 2.5% - hitting a 10- year high of about 4% around the turn of the year.

The BoE, along with most other central banks, expects this spike in inflation to ease next year once the initial effects of lifting lockdowns have passed.

The construction PMI pointed to big inflation pressures in the pipeline, as construction firms' costs grew significantly less fast than the 24 year high recorded in June.

Supply imbalances were amplified by a lack of transport availability, port congestion and trade frictions after Brexit, IHS Markit said.