Still in ‘expansion mode’

markitUK construction companies remained in ‘expansion mode’ at the end of 2013, highlighted by relatively sharp rises in output, new orders and employment.

According to the latest Markit/CIPS UK Construction Purchasing Managers’ Index (PMI), survey respondents also anticipate an increase in business activity over the course of 2014, with the proportion of firms forecasting growth (57%) well above those that expect a decline (10%). At 62.1 in December, from 62.6 in the previous month, the index was well above the 50.0 value that separates expansion from contraction. Moreover, the latest reading marked eight months of continuous output growth in the UK construction sector.

Higher levels of business activity reflected strong rates of expansion in all three categories of construction output monitored by the survey. Residential activity remained the fastest growing area of construction, but it was also the only category to post a slower pace of expansion than in November. Meanwhile, work on commercial projects rose at the steepest rate since August 2007 and civil engineering activity increased at the same pace as that reported in the previous month.

Construction companies noted that improving business conditions and greater confidence in the economic outlook had boosted spending among clients during December.

However, suppliers’ delivery times lengthened sharply at the end of 2013, as increased purchasing volumes placed pressure on stock availability. Strong demand for inputs contributed to a further rise in cost burdens in December. Latest data indicated that the rate of input price inflation was little changed since November, and remained at a level rarely exceeded during the past two and a half years.

Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, said: “The latest survey highlights that construction companies enter 2014 with the wind in their sails. Most encouragingly, the improving UK economic outlook is helping boost private sector spending patterns, meaning that the construction recovery has started to broaden out from housing demand and infrastructure projects to include strong growth in commercial building work.”

Commenting on the report, David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said: “Continued strong expansion marked an outstanding end to 2013 for UK construction, positioning the sector on a solid recovery path for 2014. The positive business outlook and soaring confidence reported in December suggests this upswing will be maintained well into the New Year.”

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