Construction output rises at fastest pace for seven months in August

markitAugust data from Markit/CIPS has indicated a continued strong recovery in UK construction output, driven by sharp rises in housing, commercial and civil engineering activity.

,A ‘sustained upturn’ in workloads and widespread confidence towards the business outlook resulted in another rapid upturn in employment numbers. Greater demand for staff also contributed to a survey record decline in sub-contractor availability, as well as the steepest rise in rates charged by sub-contractors since the survey began in April 1997.

,At 64.0 in August, up from 62.4 in July, the seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) remained well above the neutral 50.0 threshold and signalled the fastest overall increase in output levels since January.
,The latest reading also pointed to the second-strongest rate of output expansion since the pre-recession peak seen in August 2007.

,A steep increase in construction output reflected strong contributions from all three broad areas of construction in August. Residential construction posted the fastest rise in activity, despite the pace of expansion moderating slightly to a three-month low. Civil engineering activity increased at the strongest pace since March, while growth of commercial construction held close to its fastest since the summer of 2007.

,Strong gains in incoming new work were recorded during August, thereby extending the current period of continuous new business growth to 16 months. Survey respondents cited improving economic fundamentals and a corresponding rise in clients’ willingness to commit to new construction projects. As a result, construction firms remain upbeat about the prospects for output growth over the year ahead, with more than half (59%) expecting a rise in business activity and only 7% forecasting a decline.

,Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, said: “UK construction firms saw one of the sharpest rises in output for seven years in August, with increasing workloads driven by an array of factors including surging homebuilding activity, greater infrastructure spending and renewed confidence within the commercial development sector.

,“A broad-based upturn in construction demand has created a boom in job creation this summer, as construction companies look to replace capacity lost in the aftermath of the recession. However, acute skill shortages meant that sub-contractor charges rose at the fastest pace since the survey began in 1997. Meanwhile, sub-contractor availability fell at a survey-record pace, which could act to further ignite pay pressures in the short term.

,”Supply chain pressures intensified during August, as falling stocks and strong demand for inputs contributed to the steepest lengthening of vendor delivery times since the survey began 17 years ago.

,”While some survey respondents noted optimism that additional supplier capacity will come online over the near term, construction companies were generally less sanguine in relation to their staff hiring difficulties, reflecting concerns about protracted growth pains in this area.”

,Commenting on the report, David Noble, Group chief executive officer at the Chartered Institute of Purchasing & Supply, said: “The resurgence in construction has entrenched itself after a summer of blistering growth but builders should prepare for growing pains this autumn as the sector labours to recover lost capacity.”


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