Construction activity expands at fastest pace in seven months

Gurjit Degun
2 September 2014

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2 September 2014 | Gurjit Degun

The UK construction sector continued its strong recovery in August, with output rising at the fastest pace since January.

The seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) recorded a figure of 64 last month, up from 62.4 in July and above the 50 baseline indicating expansion. This was also the second-strongest rate of output expansion since the pre-recession peak seen in August 2007.

The survey found the strong performance was driven by “sharp rises” in housing, commercial and civil engineering activity last month. The PMI said there were “strong gains” in incoming new work in August, extending the current period of continuous new business growth to 16 months.

Job creation slowed slightly last month, compared with the survey-record high seen in July. Subcontractor use increased “sharply” and at the fastest rate since the survey began in April 1997.

The latest data also pointed to “a sharp and accelerated increase” in average cost burdens across the construction sector. It said the rate of input price inflation was the most pronounced since July 2011, with some firms noting strong demand for inputs had allowed suppliers to re-establish margins in recent months.

Tim Moore, senior economist at Markit, said: “Supply chain pressures intensified during August, as falling stocks and strong demand for inputs contributed to the steepest lengthening of vendor delivery times since the survey began 17 years ago.

“While some survey respondents noted optimism that additional supplier capacity will come online over the near term, construction companies were generally less sanguine in relation to their staff hiring difficulties, reflecting concerns about protracted growth pains in this area.”

David Noble, group CEO, CIPS, added: “The resurgence in construction has entrenched itself after a summer of blistering growth but builders should prepare for growing pains this autumn as the sector labours to recover lost capacity.”

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