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Construction buyers see clear blue sky

3 Nov 15 While the Office for National Statistics thinks that the construction industry is in decline, the latest monthly survey of purchasing managers indicates that output has now been growing solidly for 30 months on the trot.

October 2015 saw employment in the construction industry grow at its fastest pace for a year and the headline Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) registered 58.8 in October 2015.

This is a slower rate of growth than the 59.9 recorded in September but still firmly above the year’s lowest score of 54.2, recorded in April amid pre-election uncertainty.  The PMI has now been above the 50.0 no-change mark every month for two-and-a-half years.

This is in contrast to the opinion of economists at the Office for National Statistics (ONS) in Newport, who reckon that construction industry output fell 2.2% in the third quarter of 2015.

Markit's October PMI data, however, suggests another upturn in overall UK construction output, alongside a rebound in new order growth. Commercial building work was a key growth driver, as housing and civil engineering activity both expanded at slower rates than in September.

Despite a robust and accelerated rise in input buying, latest data indicated the lowest strain on supplier delivery times for almost five years. Meanwhile, relatively subdued cost inflation continued in October, helped by falling raw material prices (especially steel).

The latest rise in incoming new work was the steepest since October 2014, with construction companies highlighting new project wins from both public and private sector clients.

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Looking ahead, construction companies remain confident about their prospects for growth over the next 12 months, with 59% forecasting a rise in business activity and only 7% expecting a decline. Anecdotal evidence cited an encouraging number of new invitations to tender and expectations of solid spending levels among key clients.

Markit senior economist Tim Moore, author of the Markit/CIPS Construction PMI, said: “October’s survey indicates that the UK construction sector remains firmly in expansion mode, although commercial building work was the only category to experience faster growth than in September.

“Another relatively buoyant construction PMI reading indicates that the sector remains in rude health. Rather than acting as a drag on the economy, as suggested by recent GDP estimates, the sector is continuing to act as an important driving force behind the ongoing UK economic upturn.

“Construction companies also noted a rebound in new business flows during October and responded to rising workloads by taking on extra staff at the fastest rate for almost a year. Shortages of skilled staff persisted as a result, with the current period of falling sub-contractor availability the longest seen in over a decade.”

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