Sharpest rise in housing construction since November 2003

markitThe seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) registered 62.4 in July, down slightly from 62.6 in June but above the neutral 50.0 mark for the 15th successive month.

,Moreover, the latest expansion of overall construction activity was one of the fastest seen since the summer of 2007.

,Anecdotal evidence widely cited resurgent demand for construction projects, especially in the housing sector.

July data signalled the steepest rise in residential building activity since November 2003, which survey respondents attributed to favourable funding conditions and strong demand for new housing starts. Civil engineering activity also expanded at a sharper pace in July, but commercial construction increased at a slower rate than one month previously.

,Higher levels of construction output were supported by a further steep improvement in new business intakes during July. New orders have increased in each month since May 2013, and survey respondents linked the latest expansion to favourable domestic economic conditions and greater confidence among clients. The rate of job creation across the construction sector was the fastest since the survey began in April 1997.

,Anecdotal evidence attributed rising payroll numbers to increased workloads and ongoing efforts to boost capacity. In some cases, survey respondents noted that staffing levels had been increased in response to concerns about sub-contractor availability. The latest survey indicated a reduction in sub-contractor availability for the 13th month running, while rates charged by sub-contractors increased at a near survey record pace.

,Construction companies indicated another steep increase in purchasing activity during July, thereby extending the current period of expansion to 14 months. Strong demand for construction materials in turn placed additional pressure on suppliers during July, as highlighted by a steep lengthening of vendors’ delivery times. Survey respondents widely commented on low stocks and capacity shortages at suppliers. Meanwhile, average cost burdens increased sharply in July, with the pace of input price inflation easing only slightly from June’s six-month high.

,Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction
,PMI, said: “July’s figures suggest the UK construction sector is enjoying its strongest cyclical upswing since the global financial crisis, while a new record rise in employment highlights that construction firms are increasingly confident about the sustainability of the upturn.

,”All three core categories of construction activity saw historically steep improvements in output levels through July, unsurprisingly led by a resurgent house building sector.

,”Overall the survey adds to the view that construction companies have performed impressively so far this summer, which raises the likelihood that the sands of time could wash away the construction weakness seen in the preliminary second quarter GDP release.”

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