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Thu September 24 2020

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Purchasers report modest growth in output

2 Dec 11 The monthly survey of construction purchasing managers shows slight growth in output for November, though at a slower growth rate than in October.

The seasonally adjusted Markit/CIPS Construction Purchasing Managers’ Index (PMI) posted 52.3 in November, down from 53.9 in October. The latest reading signalled a modest expansion in UK construction sector activity, although the rate of growth was marginally weaker than in the previous survey period and below the long-run trend.

The survey shows that housebuilding output finally increased, after a five-month period of contraction. A rise in commercial-based activity also helped to support overall growth. Civil engineeringoutput was broadly unchanged in November.

The rate of new order growth accelerated to the fastest since May, but postponed and delayed projects restricted the extent of the expansion.

November data signalled an increase of employment in the UK construction sector, which was supported by growth of both new orders and activity. Some panellists also noted that they had bolstered their sales teams. The rate of job creation, though modest, was the strongest since March 2008. Use of subcontractors was also reported to have increased during November.

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Markit economist Sarah Bingham said: “UK construction output rose again in November, supported by an increase in new business wins. The rate of expansion slowed since October and was only modest, highlighting the wider economic headwinds currently facing the sector, but the ongoing expansion suggests that the sector may provide a positive contribution to economic growth in the fourth quarter.

“Residential construction returned to growth, ending a five-month sequence of decline. This followed data released from the Bank of England showing that mortgage approvals for house purchases were at their highest in October since December 2009. However, the increase in commercial output weakened, and work on civil engineering projects was little changed on October.

“The outlook for the sector remains challenging, with confidence over future activity levels still subdued. Construction companies’ main concern is that wider economic uncertainty will impact negatively on clients’ spending decisions. It will be interesting to see if the government’s infrastructure plans, announced in the autumn statement, will lift construction industry confidence from its current low level.”

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