News

Construction Sector Output Growth Continued To Rebound In June From Its Pre-Election Hiatus.

The monthly survey of construction purchasing managers indicates another strong showing from the industry, with business confidence strengthening to its highest level for more than 10 years.

The seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) is now nudging back towards 60.

The PMI dropped to a 22-month low in April 2015 of 54.2 as the general election approached, but picked up to reach 55.9 in May and has now recorded a score of 58.1 for June. Any score over 50 indicates that the industry is in growth mode.

House-building remains the fastest growing area of construction output, although the acceleration in the headline index since May was driven by a sharp upturn in both commercial and civil engineering activity growth during June.

Reports from survey respondents suggested that improving client demand and strong order books continued to support output growth in June. Overall growth of new work rebounded for the second successive month to its steepest since October 2014. Anecdotal evidence linked greater new business volumes to rising client confidence and improving business conditions across the UK economy as a whole.

Looking ahead, 62% of Markit’s survey panel forecast a further rise in output over the next 12 months, while only 4% expect a decline. As a result, the latest survey pointed to the strongest degree of business optimism across the UK construction sector since February 2004. Companies that anticipate a rise in business activity over the year ahead generally cited increased investment spending among clients and robust demand for new residential projects. Moreover, survey respondents noted an increase in new invitations to tender across a range of commercial projects, alongside hopes of new business gains from forthcoming major infrastructure projects.

Steeper output growth and a surge in business optimism supported an upturn in job creation across the construction sector during June. And although strains on subcontractor availability persisted in June, the latest rise in subcontractor charges was the least marked for nine months.

Alongside rising staff recruitment, greater workloads contributed to a sharp and accelerated increase in purchasing activity at construction companies in June. The latest expansion of input buying was the steepest since February. This in turn contributed to another marked deterioration in supplier performance, with lead times lengthening to the greatest degree since March.

Input price inflation accelerated to a three-month high. A number of firms linked higher construction materials prices to stock shortages at vendors.