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Purchasers' survey shows growth rate picking up again

2 Jul 14 The monthly survey of construction’s purchasing managers shows a strong rebound in growth momentum in June, with house-building and commercial building accelerating.

June also saw the steepest rise in construction industry employment levels since the survey began in April 1997.

The seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) scored 62.6 in June, up from a seven-month ‘low’ of 60.0 in May. The headline index has now posted above the 50.0 no-change threshold for 14 consecutive months and the June reading signalled the strongest pace of overall output growth since February.

Housed-building remained the best performing area of activity, showing its steepest rise since January. Commercial building activity also increased at its most marked pace for five months, which survey respondents linked to improving economic conditions and greater confidence about the business outlook.

Civil engineering was the only area of activity to record a softening in growth, with the latest expansion the least marked since September 2013. Anecdotal evidence cited rising spending on infrastructure projects, but some firms noted that the completion of work related to flood relief had contributed to a moderation in overall civil engineering output growth.

Volumes of new work received by UK construction companies increased sharply in June and at the fastest pace since January. Stronger demand for new construction projects in turn led to a rapid increase in staffing levels, with the rate of job creation accelerating to its sharpest since the survey began over 17 years ago.

Construction companies remained confident about prospects for the year ahead, reflecting strong new order inflows and favourable economic conditions. That said, the degree of positive sentiment slipped to a six-month low in June, with some panel members noting an increased risk of interest rate rises over the next 12 months.

Markit senior economist Tim Moore said: “UK construction companies started the summer with another surge in house building and commercial activity, which helped to offset a slight moderation in civil engineering growth as temporary projects related to flood relief came to completion.

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“The latest survey suggests that the UK construction sector has expanded by more than 1% over the second quarter of 2014, driven by improvements in the underlying health of the UK economy, favourable funding conditions and robust increases in new housing starts.

“A key recent development across the construction sector has been the return to pre-recession rates of job creation, following a prolonged period of falling payroll numbers and cuts to operating capacity.

“Moreover, the latest rise in construction employment was the fast since the survey began in 1997, which represents a remarkable yardstick of progress as the sector looks to recover the ground lost over the past seven years.”

David Noble, chief executive of the Chartered Institute of Purchasing & Supply, which sponsors the survey, added: “The construction boom ramped up to a four-month high in June, fuelling the strongest rise in job creation in the survey’s history. New orders accelerated sharply this month, with much of the increase driven by the expanding housing market and supported by improved commercial activity. Despite civil engineering taking some heat out of activity, UK construction is well positioned to deliver sustained growth in the coming months.

“Reflecting the strong rebound and favourable economic conditions, firms felt encouraged to take on more staff and boost their operating capacity. These chimed with positive business expectations for the year ahead; although a number of firms highlighted some concerns about the prospect of interest rate rises.

“Whilst the headline figures this month painted a positive picture, let’s not forget about the underlying pressures on building materials and manpower at supplier levels. Delivery times continued to lengthen a great deal and prices were pushed up. Pressure on suppliers needs to be watched if the sector wants to maintain a steady growth trajectory.”

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