Housing fuels strong construction and jobs figures
30th May 2017

A sharp increase in activity among UK construction companies last month was fuelled by the fastest upturn in residential work since the end of 2015, with housing rebounding strongly after the seven-month low recorded in March, according to the latest IHS Markit/CIPS UK Construction PMI.

The latest survey also revealed a sustained recovery in new work, following the soft patch seen during the first quarter of 2017. Increased workloads encouraged greater staff recruitment and a marked expansion of input buying across the construction sector.

Meanwhile, prices for imported materials continued to push up input costs during May. However, the overall rate of input price inflation eased further from the peak seen at the start of the year.

The report continues: “The seasonally adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) posted 56.0 in May, up sharply from 53.1 in April, to signal the strongest expansion of overall business activity for 17 months. While the headline index signalled robust growth momentum during May, the latest reading was still much weaker than the post-crisis peak seen in January 2014 (64.6).

A sharp and accelerated rise in residential work was a key factor supporting overall construction activity in May. The housing sub-category has rebounded strongly following the seven-month low seen in March.

Moreover, the latest increase in residential building was the fastest since December 2015. Survey respondents cited a strong pipeline of new development projects and resilient underlying demand conditions. May data also pointed to solid rises in civil engineering and commercial building. Although commercial development remained the weakest performing sub-category, the latest rise in activity was the fastest since March 2016.

New business intakes picked up in May, with the rate of expansion the fastest seen so far in 2017. Reports from survey respondents mainly cited resilient demand from the housing sector. Despite the improvement in new work, construction firms noted that heightened economic uncertainty continued to act as a brake on client spending.

Workloads underpinned a further marked rise in employment numbers across the construction sector in May. The rate of job creation accelerated for the second month running to its strongest since January 2016. Mirroring the trend for staff recruitment, latest data showed that input buying expanded at the steepest pace for 16 months in May.

A rebound in demand for construction materials placed pressure on supply chains in May, with delivery times lengthening to the greatest extent since March 2015. However, the were more positive developments in terms of cost inflation, as overall input prices rose at the slowest pace for seven months. Survey respondents reported that the weak exchange rate had led to intense negotiations with suppliers, but some noted that the peak phase of price hikes for imported materials had now passed.

https://ihsmarkit.com/