Construction plant hire prices remained subdued in the second quarter of this year showing no sign of growth after the mini spike in prices recorded late last year, according to the latest services producer prices index.

This puts prices down on the same time a year ago by about 0.6% in cash terms and leaves prices more than 8% lower than at the peak in 2006. With cost increases squeezing most if not all businesses, this suggests margins will remain under pressure.

The graph shows the relationship between the figures for construction activity, equipment hire activity and plant hire prices. It does seem to suggest that times will remain tough for plant hire firms in the light of forecasts suggesting that construction activity will fall away.

I have put in two measures of construction activity because of the recent changes made to the historic GB construction output data. I have included these (blue dotted line) along with the construction data from the GDP data (blue continuous line), which covers the UK as a whole, as does the plant hire prices (red think line) and the activity series for rental equipment (green line) from the index of services data series.

For the record I have had to estimate the final quarter figure for rental equipment activity from two months data, the June figure should be out this Friday.

For all the immediate gloom that can be found for plant hire companies in the latest services producer prices index numbers, some analysts will see an upside in the data which shows services inflation overall appears constrained at 2.4%, down from 2.7% in quarter one.

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