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Slowest rise in UK construction output since July 2013

Slowest rise in UK construction output since July 2013
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26 Jan 2015

The latest reading was higher than the long-run series average (54.5) and well above the 50.0 value that separates expansion from contraction.

Robust overall output growth continued across the UK construction sector in December, but the strength of the recovery moderated further from the peaks seen earlier in the year. That’s according to the seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI), which at 57.6, down from 59.4 in November, signaled the least marked increase in construction output for 17 months.

That said, the latest reading was higher than the long-run series average (54.5) and well above the 50.0 value that separates expansion from contraction.

December data highlighted divergent trends between the three broad categories of construction output monitored by the survey. House building activity remained the strongest performing sub-category, although the pace of expansion moderated to its least marked since June 2013. Commercial construction also increased at a solid pace, albeit slower than in the previous month. Meanwhile, civil engineering activity decreased slightly, ending a 17-month period of continuous expansion.

Construction companies recorded a solid increase in new business volumes during December. Anecdotal evidence pointed to strong demand for new residential development and a continued recovery in tenders for commercial projects. However, the rate of overall new order growth slowed for the sixth successive month to its weakest since June 2013.

Robust workloads and a sustained rebound in business activity contributed to a further sharp rise in staff recruitment at the end of the year. The rate of job creation was slightly less marked than in November, but still well above the survey’s historical average. Moreover, a number of firms highlighted worsening skill shortages across the construction sector. Reflecting this, sub-contractor availability decreased at a sharp and accelerated pace in December. Sub-contractor pay increased at the second-fastest pace since the survey began in April 1997 (exceeded only by November’s record high).

More than half of the survey panel (52%) anticipate a rise in business activity over the course of 2015, while only 13% forecast a reduction. Although the latest survey indicated strong underlying business confidence within the UK construction sector, the balance of firms expecting growth over the year ahead was the lowest recorded since August 2013.

New-build housing was cited as a key area of growth, while uncertainty related to the general election in 2015 was noted to have weighed on confidence.

Meanwhile, the construction sector experienced a moderation in cost inflation to its lowest for seven months in December, helped by falling oil-related prices. Strong supply chain pressures persisted at the end of 2014, but the latest deterioration in vendor performance was the least marked for 18 months.

News source: Courtesy of Glass & Glazing Magazine