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April sees modest recovery after melting snow

2 May 18 The monthly survey of construction purchasing managers indicates an ‘underwhelming’ recovery in construction output following the weather-related disruptions in March.

House-building was once again the driver, seeing robust growth in April. Elsewhere there are signs of fragility, with total new work rising only marginally in April.

April was the first month of 2018 to show any growth in new business, according to the IHS Markit/CIPS survey.

At 52.5 in April, the seasonally adjusted construction Purchasing Managers’ Index (PMI) picked up sharply from the 20-month low seen in March (47.0). The latest reading was the highest since November 2017 and, with anything over 50.0 indicating growth, April’s 52.5 score signalled moderate expansion of overall construction output.

Residential work grew at its strongest rate since May 2017, with activity resuming as soon as March’s snow melted.

Weather-related improvements were also seen for commercial building and civil engineering activity, with both areas recording a modest return to growth after marked declines in the previous month.

The survey also revealed a renewed rise in new order volumes across the construction sector. However, the rate of new business expansion was only marginal. Anecdotal evidence once again cited heightened economic uncertainty and subdued confidence among clients. In some cases, construction firms noted that a knock-on impact from unusually bad weather conditions had contributed to delays with sales completions during the month.

Supply chain pressures remain, with low stocks and shortages of transport capacity contributing to another sharp lengthening of delivery times for materials.  However, input cost inflation was unchanged from the 20-month low seen in March. Reports from survey respondents suggested that higher fuel costs and increased prices for steel-related inputs were key factors pushing up operating expenses in April.

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Tim Moore, associate director at IHS Markit and author of the survey, said: “A rebound in construction activity was pretty well inevitable after snowfall resulted in severe disruptions on site during March. House building led the way, with growth in April among the strongest seen over the past two-and-a-half years. However, the picture was less positive in other areas of construction, with commercial building and civil engineering work rising only marginally.

“While temporary factors make it difficult to gauge underlying momentum, the recovery from March’s low point is somewhat underwhelming and provides an indication that the construction sector has been treading water at the very best in recent months.

“A consistent theme so far this year has been fragile demand conditions and subdued volumes of incoming new work. Survey respondents noted that heightened economic uncertainty continued to hold back construction growth in April, with risk aversion among clients leading to delays with spending decisions on new projects.”

Duncan Brock, a director at the Chartered Institute of Procurement & Supply, said: “April’s data provides some relief after last month’s weather disruption, especially for the housing sector after a lacklustre few months. However, economic uncertainty and Brexit-related indecision continue to lurk beneath the surface as obstacles to the construction sector’s stability. New orders remain too few and far between, with just a small improvement in the level of extra work reported this month.

“The effects of the previous month’s bad weather were echoed in April as supply chains stayed under the cosh again. Besieged by raw material stock shortages and capacity difficulties, suppliers tried to catch up on their delivery commitments with limited success. Transportation times were still lengthy for construction materials for projects already in the pipeline.

“There were some positives reported by construction firms in April as optimism rose to its highest level since May 2017 and an increase in workforces was reported in anticipation of a better second quarter of the year. What the sector needs now is more widespread client confidence and big ticket projects to follow suit. House building at least seems to be moving in the right direction, and by achieving its fastest rate of growth since May 2017 it has gone from a laggard to a construction leader again.”

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