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August sees strongest rise in construction output for six years

3 Sep 13 The monthly survey of construction purchasing managers reveals that August 2013 saw the biggest rise in output since September 2007.

Both output and new business volumes grew strongly in August and construction companies expressed confidence about the year-ahead outlook, with 46% of respondents expecting a rise and only 10% a reduction.

Adjusted for seasonal influences, the headline Markit/CIPS UK construction purchasing managers’ index (PMI) registered 59.1 in August, up from 57.0 in July.

It was the fourth month in a row that the PMI scored above the 50.0 no-change mark.

Residential construction remained the strongest performing sub-sector, with output rising at the fastest pace since June 2010.

August data also highlighted a steep acceleration in the rate of civil engineering activity growth to its strongest since September 2007. Commercial construction activity increased at the most marked pace since May 2012.

UK construction companies widely reported that the latest upturn in business activity was supported by a strong improvement in spending among clients. Incoming new work increased sharply and at the fastest rate since March 2012. Anecdotal evidence from survey respondents generally cited higher levels of housing-related demand and greater levels of public sector infrastructure spending.

Higher levels of new business helped maintain confidence in the year-ahead outlook for construction output. Construction companies mostly linked their confidence to improvements in the wider economy and resulting increases in clients’ willingness-to-spend. This in turn had a positive impact on job hiring in August, with construction employment rising for the third month running and at a solid pace.

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The rise in input buying was the fastest since March 2012. Greater demand for construction inputs placed pressure on suppliers’ operating capacity, as highlighted by delivery times lengthening to the greatest degree since June 2007. Alongside this, August data signalled the fastest increase in average cost burdens since December 2011.

Markit senior economist Tim Moore, author of the Markit/CIPS Construction PMI, said: “The latest construction PMI figures are yet another indication that the UK economy has performed impressively over the summer months. A steep upturn in civil engineering activity suggested that public sector demand has joined residential building as a key driver of construction output growth during August.

“With overall output levels now rising at the fastest pace for around six years, it seems highly likely that the construction sector will provide another positive contribution to UK GDP in the third quarter of 2013.

“New public sector infrastructure spending looks to have started making an impact on the ground, and this was a contributory factor behind the sustained construction sector job creation seen in August.”

Chartered Institute of Purchasing & Supply chief executive David Noble added: “A new dawn is breaking in construction.”

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