Increase in orders stimulates construction sector growth

2 June 2011

2 June 2011 | Adam Leach

Activity in the UK construction sector grew in May as a result of an increase in orders despite rising raw material prices, according to the latest PMI.

This month’s Markit/CIPS Construction Purchasing Managers’ Index (PMI) rose to 54 from 53.3 in April, indicating an increased rate of growth in the sector.

The commercial sector showed the strongest growth for the second successive month as it outperformed expansion in house-building, while civil engineering saw a drop in activity.

David Noble, CIPS chief executive, said: “The millstone of public spending cuts can be seen clearly in this month’s construction PMI, but aside from the unsurprising decline in civil engineering activity, the overall figures are not quite so foreboding.”

He added: “Sustained growth of commercial activity and reports of an unblocking of order books is much-needed good news.”

Putting the figures into context Noble said: “It remains to be seen whether a marked expansion of commercial projects will help to replace what has been lost elsewhere, but it has contributed to a small improvement in confidence.”

The survey concluded that one of the main drivers of the growth was an increase in tenders and a high number of negotiations being concluded.

Sarah Ledger, economist at Markit said: “New order growth was marked, suggesting that increasing levels of output will be sustained.”

Inflation dropped slightly for the second consecutive month though remained at an historically high level as a result of increased raw materials.

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