Housing drives construction sector growth

Will Green is news editor of Supply Management
2 November 2016

Residential housing was the main driver of growth in the UK construction sector in October.

The Markit/CIPS UK Construction Purchasing Managers’ Index edged up to 52.6 in October, compared to 52.3 in September and against the no-change reading of 50.

While housing was the key growth driver, commercial construction stabilised while civil engineering, the weakest performing category, decreased slightly.

Input prices increased at the fastest rate since July 2011 and anecdotal evidence suggested suppliers were passing on the higher costs of imported raw materials, a result of the weaker pound. Sterling depreciation also hit the UK's manufacturing sector in October.

Some 43% of survey respondents expected a rise in business activity over the next 12 months, against 14% that forecast a reduction, but the level of optimism was down markedly on September and the second lowest since May 2013. A number of respondents cited the impact of Brexit uncertainty on investor sentiment and reduced confidence in the general economic outlook.

David Noble, group CEO, CIPS, said: “Supplier performance deteriorated slightly, reflecting the ongoing trend of low stocks seen in the last few months, as the level of input buying increased at its fastest rate since March.”

Tim Moore, senior economist at IHS Markit, said: “Subdued new order intakes contributed to a fall in construction sector business confidence for the first time since July.

“At the same time, a sharp pace of input price inflation added to construction firms’ anxieties about the year-ahead business outlook, with higher costs overwhelmingly linked to supplier price hikes in response to the weak pound.”

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