Construction industry hits eight-month high

2 March 2011

2 March 2011 | Rebecca Ellinor

The UK construction sector last month enjoyed its strongest performance since June, the latest Markit/CIPS UK Construction PMI shows.

The index, published today, shows output rising at its fastest rate in eight months on the back of new business. The seasonally adjusted PMI posted 56.5, up from 53.7 in January – although both were above the crucial no-change mark of 50 showing growth.

New orders expanded as a result of more tenders becoming available and projects being confirmed.

Each of the three broad areas of construction activity (civil, commercial and residential) monitored by the survey registered growth in February. The strongest expansion was seen in civil engineering, which grew at its fastest rate in three years. The latest increase in residential construction was also marked compared to recent months, with house building registering the fastest increase in activity since last summer. Commercial activity increased at a solid pace and has grown every month for the past year.

Employment fell again, but at the weakest rate in the current sequence of job cuts and optimism over future business prospects remained well below the long-term trend.

Sarah Ledger, economist at Markit and author of the UK Construction PMI, said demand and supply side pressures continue to push up purchase prices, with construction costs increasing at the fastest rate since August 2008 and delivery delays the worst for over three years. She added: “Concerns about rising costs and fears over cuts in public spending meant future business optimism.”

CIPS CEO David Noble said: “A weather-beaten UK Construction sector is showing signs of repair. However, this new phase of recovery is at least in part built on shifting sands.

As for manufacturing, the construction sector is suffering from higher input prices which increased considerably during February. A total of 53 per cent of panellists indicated a rise in costs since January. Companies who have carefully managed costs may be in a better position to deal with this and the likely further aggravations caused by the unrest in the Middle East.”

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