Purchasing managers see industry rebound
UK construction ended 2015 in a positive mood, according to the latest monthly survey of purchasing managers in the industry.
The headline seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) registered a score of 57.8 in December, boucing back from a seven-month low of 55.3 in November.
Commercial construction was the best performing sub-category of activity in December, with the latest upturn the fastest since October 2014. Survey respondents noted that improving UK economic conditions continued to boost demand for commercial projects. The rate of growth in housing activity also picked up again after the 29-month low seen during November. Anecdotal evidence cited an improving flow of development opportunities and new invitations to tender.
However, there was a marginal decline in civil engineering activity, ending a seven-month period of sustained growth.
December data signalled an accelerated increase in new business volumes, mirroring the trend recorded for construction output at the end of 2015. The latest rise in new work was the second-fastest since July, which survey respondents linked to favourable demand conditions and general market confidence. Clients seem more willing to commit to new projects, respondents said. This in turn encouraged increased job creation among construction companies during December, with the rate of employment growth rebounding from the 26-month low recorded in November. Subcontractor usage also picked up at the fastest pace since August 2014.
The latest survey highlighted the second-fastest increase in purchasing activity since January 2015. Strong demand for inputs, alongside an ongoing squeeze on supplier capacity, resulted in the sharpest drop in vendor performance since June, the survey authors report. At the same time, input cost inflation softened again in December, reaching its lowest for eight months.
A number of construction firms reported lower transportation and steel costs. Moreover, subcontractor rates increased at the slowest pace since August 2013.
51% of the survey panel expect a rise in business activity over the course of 2016, while only 7% forecast a reduction. This indicated the weakest degree of positive sentiment since February 2015, although the index remains well above its post-2008 average. Survey respondents noted that greater client budgets, improving economic conditions and a strong pipeline of new projects had underpinned business confidence in December.
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This article was published on 5 Jan 2016 (last updated on 5 Jan 2016).