UK construction sector growth steepest since 2007

Gurjit Degun
3 December 2013

The UK construction industry has seen the steepest expansion of overall business activity for more than six years.

November’s seasonally-adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) hit 62.6, up sharply from 59.4 in October. This is above the 50.0 baseline indicating expansion for the seventh successive month.

The latest data was also above the long-run series average of 54.1, indicating the steepest expansion of overall business activity for just over six years.

Construction firms pointed to a “steep and accelerated expansion” of house building activity in November, with the rate of growth the fastest for 10 years. Work on commercial construction projects also increased sharply during the latest survey period, and the rate of expansion was the steepest since September 2007.

Volumes of new work increased at a “strong and accelerated” pace, with the latest rise in new orders the joint-sharpest for just over six years. Anecdotal evidence said there were more favourable business conditions in November. Respondents noted a rising confidence in the economic outlook and improving credit conditions helping to boost spending across the sector.

Higher levels of new work contributed to sharp rises in employment and purchasing activity. Increased input in buying and net job creation has been recorded for six consecutive months, and in each case the latest expansion was also the fastest for just over six years.

Tim Moore, senior economist at Markit and author of the UK Construction PMI, said: “Construction growth is still coming from a low base as output levels rebound from a deep and protracted double-dip recession that only really ended this summer.

“Therefore, while construction’s current growth trajectory may be the steepest for over six years, there is still a huge loss of output to recoup before the sector reaches its pre-recession peak.

“Looking ahead, there are a number of positive signs that improvements in activity levels will be maintained, as job creation picked up again in November and confidence about the business outlook reached its highest level since September 2009.”

CIPS group CEO David Noble added: “House building lived up to its new found status as star performer in November with the steepest growth rates in 10 years, with commercial and civil engineering activity holding their ground too. Inevitably, business confidence continued to rise sharply, helping to boost spending across the industry heading into the festive season.

“As seen in previous months, suppliers are struggling to keep up with the sharp surge in demand; stocks are being squeezed and delivery times continue to lengthen, to the greatest degree since 1997.”

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