Markit/CIPS UK survey shows sharp rise in UK construction last month

Construction in London

Independent provider of business surveys Markit Economics and the Chartered Institute of Purchasing & Supply (CIPS), a procurement and supply professional organisation, published the seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) on Friday, which indicates continuing strong growth in the UK construction industry.

The Markit/CIPS UK Construction PMI survey shows that construction output increased sharply in April this year, with higher levels of construction output recorded for 12 consecutive months. UK housing activity growth is currently said to be nearing a 10-year high.

However, the reported growth was at its weakest rate for six months and expansion has slowed since October 2013. According to the Markit/CIPS UK PMI, UK construction dropped to 60.8 in April, compared to the previous reading of 62.5. But the new figures are greater compared to the long-run survey average of 54.3 and much higher than the 50.0 no-change threshold.

UK residential construction achieved the best performing broad area of activity in April this year and expanded at the fastest pace in the past decade. Growth in house building has been maintained over the last 15 months, the longest period of growth since 2006/07.

There was a steep rise in commercial activity during April, however civil engineering activity slowed significantly and was at its lowest level since September 2013. Work related to flood relief resulted in a moderate increase for some civil engineering companies.

According to the latest Markit/CIPS UK Construction PMI figures, there was a sharp increase in new business for UK construction companies in April, with expansion rising the fastest since January. Respondents to the survey experienced positive influences on new business volumes such as higher numbers of new housing starts and increased levels of public sector infrastructure spending, as well as better underlying economic conditions.

The figures for April also showed a steep rise in employment in the construction sector, which mean that job creation in the industry has continued for 11 months. Greater output requirements and confidence about the outlook for business activity were said to have resulted in an increase in construction employment. The survey indicates that 56% of construction companies expect output to rise, compared to 5% forecasting a fall over the next year.

Pressure on supply chains continued in April this year, with a sharp decrease in vendor performance. There was also a further drop in the availability of sub-contractors during the month, data from the Markit/CIPS UK Construction PMI showed.

The data also indicated that there was further increase in purchasing activity among construction firms, which highlighted the strength in demand for inputs. Increased levels of input buying have been recorded every month since June last year. Respondents to the Markit/CIPS UK Construction PMI said prices for raw materials such as bricks and timber were higher.

Author of the Markit/CIPS Construction PMI and senior economist at Markit, Tim Moore, commented: “Construction growth has started to moderate from the rapid pace seen over the winter, but strong rises in new work and payroll numbers provide ample optimism that output will expand strongly over the course of 2014.

“Better economic conditions, a surge in house building, improved access to finance and greater investment spending are all important tailwinds for UK construction growth this year. Moreover, the latest survey is another indication that current UK construction trends are healthier than the relatively meagre official growth estimates so far this year.

“April’s survey indicated that residential building was the fastest growing area of UK construction activity, with the latest expansion correlating with at least 45,000 new housing starts per quarter. While there looks to have been a further steep upturn in new house building starts in April, the trend remains well short of estimated increases in underlying demand each year.”

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