Housebuilding pulls construction activity out of five-month rut

November data pointed to a moderate rebound in UK construction output, with business activity rising at the strongest rate since June. New orders and employment numbers also increased to the greatest extent in five months.

Tim Moore, Associate Director at IHS Markit and author of the IHS Markit/CIPS Construction PMI, said, “Once again, resilient housebuilding growth helped to offset lower volumes of commercial work and civil engineering activity. Survey respondents noted that residential projects underpinned the rebound in total new order growth to its strongest since June, helped by strong demand fundamentals and a supportive policy backdrop.

Adjusted for seasonal influences, the IHS Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI® ) picked up from 50.8 in October to 53.1 in November, to remain above the 50.0 no-change value for the second month running.

The latest reading was the highest for five months and signalled a solid rate of business activity growth across the construction sector. Housebuilding projects were again the primary growth engine for construction activity. Survey respondents suggested that resilient demand and a supportive policy backdrop had driven the robust and accelerated upturn in residential work. Commercial construction was the weakest performing area of activity in November, which continued the trend seen for much of 2017 so far.

Some firms noted that Brexit-related uncertainty and the subdued economic outlook had held back spending among clients.

Construction companies indicated a moderate rebound in new orders in November, with the rate of expansion the fastest for five months. Anecdotal evidence cited a general improvement in client demand after the soft patch this summer. Higher levels of new work helped to support a moderate rise in staff numbers and input buying in November. Lead-times for construction products and materials lengthened sharply, linked to pressure on supplier capacity. However, cost inflation eased to its least marked for 14 months, with some firms reporting signs that exchange-rate driven price rises had started to lose intensity.

Business confidence regarding the year-ahead outlook for construction activity remained among the most subdued since mid-2013, which panel members mainly linked to heightened political and economic uncertainty. However, the degree of optimism picked up from October’s 58-month low, helped by a modest recovery in new invitations to tender during the latest survey period.

Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply, said, “At last the construction sector, has picked its feet up with the biggest overall improvement in five months, underpinned by a moderate rise in new orders, but the strongest since June.

“It appears that policy support and a small recovery in the UK economy has boosted sentiment and encouraged clients to come out of their shells and start building again.

“The housing sector was the primary driver of growth increasing at the fastest rate for almost half a year.

“Across construction supply chains, delivery times have been under pressure, as materials were in higher demand, while stocks remained in short supply. Lead-times from vendors have now deteriorated in every month for over seven years.

“Overall, the sector showed an incremental improvement, but business optimism was on the rise and up from last month’s five-year low. Perhaps the darkest days are behind the sector with fresh impetus on the horizon for the New Year.”

Did you like this? Share it:

Add Comment

Your email address will not be published. Required fields are marked *