The GBP EUR exchange rate was higher by 0.45% on Monday after a boost from the UK construction sector. Indicators were at their highest level in four months for UK builders. In Europe, factory orders in Germany were also lower.
The GBP EUR was trading at 1.1750 on Monday with ZEW economic sentiment figures ahead for Germany today.
UK construction boosts sterling with shortages easing up
Growth in the UK’s construction industry was seen at its fastest pace in four months in November, after shortages in materials eased.
Data firm IHS Markit said there was a sharp increase in activity at building firms last month. The sector was driven by an upturn in commercial work, with the reopening leading to new projects and infrastructure work.
The number of firms reporting longer delivery times fell to 47% in November, from a peak of 77% in June, according to Markit. Prices were still seen rising with 72% of firms reporting an increase in purchase prices, which was a 3% a decline.
Tim Moore, director at IHS Markit, said:
“Input price inflation remains extremely strong by any measure, but it has started to trend downwards after hitting multi-decade peaks this summer.
The latest rise in purchasing costs was the slowest since April, helped by a gradual turnaround in supply chain disruption and a slight slowdown in input buying. Port congestion and severe shortages of haulage capacity were again the most commonly cited reasons for longer lead times for construction products and materials.”
Logistics UK also released a report which showed HGV driver shortages were starting to ease.
European construction stronger but German factory orders slump
A 6.9% slump in orders at German factories in October highlighted ongoing supply chain issues, says Carsten Brzeski of ING:
“Today’s industrial orders data is a cold shower for German industry.
When the global economy came out of the 2020/21 winter lockdown, German industrial orders jumped to unprecedented levels, growing on average by more than 2% per month. At the end of the summer, however, orders collapsed and dropped by more than 12% between July and October.
The sharp collapse over the summer is increasingly leaving its mark on industry – a reflection perhaps of ongoing supply chain frictions and companies simply delaying new orders or, worse, cancelling orders, knowing that delivery times are long anyway.”
The German figures dragged the euro lower after construction was also seen improving in the eurozone. The eurozone construction sector rose at its fastest pace in nearly four years in November.
Output and new orders both increased for the month, according to the latest survey of building firms from IHS Markit, with construction activity rising at a series record pace in Italy.
“Notably, input costs continued to increase at a substantial pace amid ongoing severe supply chain disruption. These lingering issues weighed on business sentiment, with the degree of optimism regarding the year-ahead outlook easing to the softest since April,” the group said.
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