Construction News

Sun December 16 2018

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Buyers' survey suggests construction industry is regaining confidence

4 Dec November saw further growth in UK construction output and new orders, the monthly survey of industry purchasing managers suggests.

We are still above the line, indicating industry growth
We are still above the line, indicating industry growth

The rate of job creation in the construction industry was the fastest since December 2015 and business confidence has rebounded a little from the near six-year low seen in October. The latest reading signalled the strongest degree of confidence for three months.

The seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index – what they used to call the purchasing managers’ index, or PMI – registered 53.4 in November, up from 53.2 in October, to remain above the crucial 50.0 no-change mark for the eighth successive month. It was the highest score since July.

Residential building reclaimed its position as the fastest growing area of construction work in November. The latest rise in house-building activity was the strongest for three months. Commercial construction and civil engineering activity also grew, the survey results indicate.

The rate of new business growth picked up since October, but remained softer than seen on average in the third quarter of 2018. Some construction firms noted that Brexit uncertainty had held back new order growth, while there were also reports citing delays to public sector spending decisions. Higher levels of new business contributed to a rise in input buying and rising employment numbers during November. The latest increase in staffing levels was the fastest since December 2015. Meanwhile, greater demand for construction products and materials contributed to lengthening delivery times from suppliers, which have been getting progressively worse every month since September 2010, the survey suggests.

Growing demand for construction inputs led to another sharp rise in input prices during November. Survey respondents also commented on higher transportation costs and rising staff salaries. The overall rate of input price inflation was the fastest since June.

Tim Moore, economics associate director at IHS Markit, which compiles the survey, said: “November data indicates that the UK construction sector remains in expansion mode, with resilient business activity trends seen for housing, commercial and civil engineering activity. The latest overall rise in construction output was the fastest since July, helped by a stronger contribution to growth from house building activity.

"Higher levels of new work were recorded for the sixth month running in November, which resulted in a robust and accelerated rise in staffing numbers. The latest upturn in employment was the fastest for almost three years. A number of construction firms noted that greater demand for staff had led to upward pressure on salaries in November.

"Business confidence regarding the year ahead outlook for construction work picked up from October's recent low, but remained weaker than seen on average in the first half of 2018. Survey respondents widely commented that Brexit-related uncertainty had held back business optimism in November."

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, which sponsors the survey, said: “After last month’s disappointing levels of business optimism, the construction sector perked up marginally in November. There was good activity across all the sub-sectors and residential building reclaimed its leader of the pack status with the strongest performance of all three.

"Levels of new work improved, and employment numbers increased at their fastest rate since December 2015, as projects finally started after sustained periods of delay. But before the champagne corks start popping, this rise in the overall index was small. Even with optimism at a three-month high, there is currently no indication that this will become a sustained rise as we approach the end of the year.

"Constrained supply chains were still underperforming as supplier operations worsened again and to their weakest level for three months. Suppliers reduced their stock levels and reports of raw material shortages gnawed away at efficiency. Adding to this challenging mix, prices for raw materials continued their strong upward trajectory, so the pathway ahead is still far from clear of blockages, Brexit-related or otherwise.

The rate of job creation was the fastest since December 2015 and although business confidence remains relatively subdued, it has rebounded a little from the near six-year low seen in October. The latest reading signalled the strongest degree of confidence for three months.

The seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index – what they used to call the purchasing managers’ index, or PMI – registered 53.4 in November, up from 53.2 in October, to remain above the crucial 50.0 no-change mark for the eighth successive month. It was the highest score since July.

Residential building reclaimed its position as the fastest growing area of construction work in November. The latest rise in house-building activity was the strongest for three months. Commercial construction and civil engineering activity also grew, the survey results indicate.

The rate of new business growth picked up since October, but remained softer than seen on average in the third quarter of 2018. Some construction firms noted that Brexit uncertainty had held back new order growth, while there were also reports citing delays to public sector spending decisions. Higher levels of new business contributed to a rise in input buying and rising employment numbers during November. The latest increase in staffing levels was the fastest since December 2015. Meanwhile, greater demand for construction products and materials contributed to lengthening delivery times from suppliers, which have been getting progressively worse every month since September 2010, the survey suggests.

Growing demand for construction inputs led to another sharp rise in input prices during November. Survey respondents also commented on higher transportation costs and rising staff salaries. The overall rate of input price inflation was the fastest since June.

Tim Moore, economics associate director at IHS Markit, which compiles the survey, said: “November data indicates that the UK construction sector remains in expansion mode, with resilient business activity trends seen for housing, commercial and civil engineering activity. The latest overall rise in construction output was the fastest since July, helped by a stronger contribution to growth from house building activity.

"Higher levels of new work were recorded for the sixth month running in November, which resulted in a robust and accelerated rise in staffing numbers. The latest upturn in employment was the fastest for almost three years. A number of construction firms noted that greater demand for staff had led to upward pressure on salaries in November.

"Business confidence regarding the year ahead outlook for construction work picked up from October's recent low, but remained weaker than seen on average in the first half of 2018. Survey respondents widely commented that Brexit-related uncertainty had held back business optimism in November."

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, which sponsors the survey, said: “After last month’s disappointing levels of business optimism, the construction sector perked up marginally in November. There was good activity across all the sub-sectors and residential building reclaimed its leader of the pack status with the strongest performance of all three.

"Levels of new work improved, and employment numbers increased at their fastest rate since December 2015, as projects finally started after sustained periods of delay. But before the champagne corks start popping, this rise in the overall index was small. Even with optimism at a three-month high, there is currently no indication that this will become a sustained rise as we approach the end of the year.

"Constrained supply chains were still underperforming as supplier operations worsened again and to their weakest level for three months. Suppliers reduced their stock levels and reports of raw material shortages gnawed away at efficiency. Adding to this challenging mix, prices for raw materials continued their strong upward trajectory, so the pathway ahead is still far from clear of blockages, Brexit-related or otherwise.”

MPU

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