Input prices fell by nearly 3% last month after a 0.4% rise in May
A sharp reduction in manufacturing input prices has paved the way for an easing of construction product inflation over the next few months, according to industry experts.
Manufacturing input prices, which are seen as an indicator of the cost of construction materials, fell by 2.7% in the year to June, down from a rise of 0.4% in the year to May.
Meanwhile, output prices rose by 0.1% in the year to June, down from a rise of 2.7% in the year to May.
Construction Products Association head of construction research Rebecca Larkin said the figures point to 鈥渇urther relief from the double-digit increases in prices for construction products and materials that have been recorded over the last 18 months鈥�.
But she warned that even as inflation slows, prices are still rising on top of last year鈥檚 19.1% increase and the 15.2% rise in 2021.
The figures were part of a wider release today showing inflation slowed last month to 7.9% from 8.7% in May.
Share prices of the UK鈥檚 top housebuilders shot up by as much as 9% this morning following the surprise drop.
The housing sector has been squeezed by higher mortgage rates which have risen over the past 18 months in response to the Bank of England鈥檚 repeated interest rate hikes.
But experts say the central bank is now likely to opt for a 0.25% raise next month instead of 0.5%, bringing the base rate up to 5.25%.
Increased confidence in housing this morning saw the share price of Persimmon, the UK鈥檚 second biggest housebuilder, jump by 9.4%, while Barratt, the country鈥檚 largest, saw its share price rise by nearly 7%.
Taylor Wimpey鈥檚 share price was up by 6.6% this morning, while Vistry鈥檚 was up 6.5%, Bellway鈥檚 was up 6.3% and Berkeley鈥檚 rose 5.2%.
Simon Rawlinson, head of strategic research and insight at consultant Arcadis, said the inflation results were 鈥渢he news we needed to hear鈥�.
鈥淭here was a lot of concern that the Bank of England鈥檚 trends would continue,鈥� he said, adding the inflation slowdown relieves pressure off the bank to take further action in their next meeting in August.
Bank of England governor Andrew Bailey has overseen a total 13 rate rises since December 2021.
Analysts Capital Economics predict rates will now peak at 5.5%, down from the forecast of 6% which would have occurred without June鈥檚 drop in inflation.
Larkin said the sharp rise in interest rates so far has 鈥渘oticeably dented confidence鈥� in the housing market, as well as in sectors such as commercial offices and industrial warehouses where developers had grown accustomed to the ultra-low interest rates of the last decade.
鈥淥nce we get clear signs that the rate-hiking cycle is near its end, at least that provides some clarity for potential house buyers and the housing market,鈥� she added.
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