Further growth is also widely anticipated for 2014.
The seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) showed a score of 62.1 for December, down only marginally on November’s 62.6 score – a 75-month high – and continuing well above the 50.0 no-change level.
The December reading marked eight months of continuous output growth in the UK construction sector.
Higher levels of business activity reflected strong rates of expansion in all three broad categories of construction output monitored by the survey: house-building, commercial construction and civil engineering.
Residential activity remained the fastest growing area of construction, but it was also the only category to post a slower pace of expansion than in November. Meanwhile, work on commercial projects rose at the steepest rate since August 2007 and civil engineering activity increased at the same pace as that reported in the previous month.
Construction’s purchasing managers noted that improving business conditions and greater confidence in the economic outlook had boosted spending among clients during December. Higher levels of incoming new work have now been recorded in each of the past eight months. Although the rate of new order growth eased since November, the latest expansion was one of the steepest seen since late 2007. And the proportion of companies expecting an increase in output levels (57%) is much higher than was recorded just before the start of 2013 (31%).
Stronger business confidence and a sustained improvement in new order levels continued to drive staff recruitment in the construction sector during December. Increased workforce numbers have now been recorded for seven consecutive months, which is the longest continuous period of job creation for around five-and-a-half years. Construction companies also pointed to the fastest rise in subcontractor usage since April 2004.
Meanwhile, suppliers’ delivery times lengthened sharply at the end of 2013, as increased purchasing volumes placed pressure on stock availability. Strong demand for inputs contributed to a further rise in cost burdens in December. Latest data indicated that the rate of input price inflation was little-changed since November, and remained at a level rarely exceeded during the past two-and-a-half years.
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Markit senior economist Tim Moore said: “The latest survey highlights that construction companies enter 2014 with the wind in their sails. Most encouragingly, the improving UK economic outlook is helping boost private sector spending patterns, meaning that the construction recovery has started to broaden out from housing demand and infrastructure projects to include strong growth in commercial building work.
“Over half of all survey respondents anticipate increased output levels during the course of 2014, which is up sharply from one-in-three construction firms that expected growth at the same time one year ago.
“Stronger growth expectations and fuller order books are continuing to fuel job creation in the construction sector. Higher employment numbers have now been reported for seven successive months, and these efforts to meet a sudden turnaround in UK construction demand should help keep staffing levels moving strongly upwards into 2014.”
David Noble, chief executive of the Chartered Institute of Purchasing & Supply, which sponsors the survey, said: “Continued strong expansion marked an outstanding end to 2013 for UK construction, positioning the sector on a solid recovery path for 2014. Whilst housing remained the fastest growing activity and civil engineering maintained its pace, commercial activity reported the sharpest rate of expansion since August 2007; an indicator of the broadening out of the recovery. The positive business outlook and soaring confidence reported in December suggests this upswing will be maintained well into the New Year.
“It is pleasing to see the growth in the sector leading to such significant hiring of staff. As construction reported its strongest quarterly performance since Q3 2007 and as levels of new orders continue to rise, job creation is ramping up and has now been increasing for seven consecutive months. This is a good sign that activity will remain strong in the months ahead.
“The natural consequences of the rapid jump in construction activity during 2013 have been the continued squeeze on stocks at supplier level and the lengthening of delivery times. These pressures, alongside increasing business costs, will remain in 2014, but with hopes that they won’t prolong.”
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