UK construction activity growth remains subdued in May

June 4, 2018 / Isla MacFarlane
UK construction activity growth remains subdued in May

Latest PMI data signalled only a modest improvement in UK construction activity midway through the second quarter, with the pace of expansion matching that registered in April.

At 52.5 in May, the seasonally adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) remained unchanged since April. The figure was indicative of a moderate increase in total activity, albeit one that was subdued in the context of historical data. Some firms suggested that unusually good weather conditions had supported activity and enabled them to continue catching up after prior months’ weather-related disruptions.

Residential work remained the strongest of the three monitored sub-sectors for the third month running during May. The pace of expansion eased from April’s 11-month high, which had seen housebuilding activity rebound from heavy snow in March.

“It’s encouraging to see the housing sector put in a strong performance for a second month running, after stumbling at the beginning of the year, and with only small improvements in the other sectors, residential building is keeping construction’s head above water,” said Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply.

Sam Teague, Economist at IHS Markit and author of the IHS Markit/CIPS Construction PMI, added, “The May PMI data signalled an unchanged pace of activity growth across the UK’s construction sector since April’s somewhat underwhelming rebound, yet nevertheless indicating a recovery in the second quarter after the contraction seen at the start of the year.”

New order books slipped back into decline during May. Panel respondents blamed political and economic uncertainty, subdued retail sector conditions and fragile business confidence as key causes of weaker demand for construction projects.

That said, the rate of contraction was only fractional and slower than the declines seen throughout the first quarter. Optimism towards future growth prospects meanwhile slumped to a seven-month low in May.

The drop in confidence was linked to fears of political and economic uncertainty and an expected slowdown in the construction sector.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said, “The two millstones of uncertainty and weak economic growth gave the sector plenty to worry about this month, and whilst activity still grew, the lowest business confidence in seven months suggests the subdued pipeline of new work is having an effect.”

Alongside easing positive sentiment, job creation softened to a four-month low in the latest survey period. Surveyed companies continued to report a shortage of skilled staff availability. Purchasing costs faced by construction firms rose sharply in May. The rate of input price inflation was the steepest registered since February.

Panel members commonly reported elevated fuel costs, alongside higher plastic and steel-related input prices. Supplier delivery times continued to worsen in the latest survey, though the degree of deterioration was one of the weakest over the past year-and-a-half.

Where longer times were reported, businesses frequently blamed shortages of materials at vendors.

“It’s likely that the construction sector’s performance will be a slow and steady crawl through the second quarter, as the spectre of Brexit continues to dominate, and the double pincer movement of few orders, and higher costs, could see the sector stutter further,” said Brock.

PHOTO CREDIT: Robin Webster

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