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Sun June 13 2021

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‘New wave of optimism’ sweeps across construction sector

2 Aug 13 Optimism across the construction industry is now at its highest level for more than three years, thanks to the upturn in housebuilding.

That is one of the primary conclusions of the latest monthly survey of construction industry purchasing managers.

The rebound in output levels seen in the second quarter of 2013 continued into July, with a sharp increase in activity and new orders.

The seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) scored 57.0 for July, up from 51.0 in June. The index was above the 50.0 no-change value for the third month running, and the latest reading signalled that the rate of output growth picked up to its fastest since June 2010.

Higher levels of business activity were recorded in all three broad areas of the construction sector monitored by the survey in July: house-building, commercial construction and civil engineering.

However, house-building activity was by far the strongest performing category, with output growth surging to its steepest since June 2010. Growth of housing activity has now been recorded for six months running. Meanwhile, civil engineering activity returned to expansion in July, and commercial construction output rose at its most marked pace since May 2012.

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Construction companies widely linked the acceleration in output growth to stronger inflows of new business in July. Latest data pointed to an increase in new orders for the third month running and the steepest rate of growth since April 2012. Anecdotal evidence suggested that a marked improvement in demand within the house building sector had underpinned the expansion in new business inflows, alongside a general rise in client spending amid signs of better conditions across the wider UK economy.

Increased volumes of new work contributed to a further upturn in construction firms’ confidence about the 12-month business outlook. The degree of positive sentiment reached its strongest since May 2010, with survey respondents widely commenting on expectations that improving market conditions would lead to greater sales and new project wins over the year ahead. This in turn led to a rise in employment levels for the second month running and the strongest pace of job creation in the sector since December 2011.

Meanwhile, the latest upturn in construction output led to a sharp rise in purchasing activity in July. There were signs that this placed further strains on suppliers to the construction sector, with vendor lead-times lengthening to the greatest degree since June 2007, while cost inflation picked up to its fastest for nine months.

Markit senior economist Tim Moore said: “July’s survey highlights a new wave of optimism across the UK construction sector, with companies reporting a pace of expansion in excess of anything seen over the past three years. The swing back to output growth broadened to include commercial and civil engineering activity during July, although housing construction remains the one thing crucial to the sector’s strong upturn at present.

“Construction firms saw the fastest improvement in new orders for over a year, which helped kick-start job creation and input buying growth during July. A switch to sharply rising purchasing activity may have caught some suppliers by surprise, as delivery times lengthened to the greatest degree in over seven years.”

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