Construction sector prices rise at fastest rate in five years

Will Green is news editor of Supply Management
2 September 2016

Input prices in the UK construction sector rose at their fastest pace for more than five years in August.

A weaker pound was blamed for the rise in the IHS Markit/CIPS UK Construction Purchasing Managers’ Index, which also showed the sector’s post-Brexit contraction eased.

The index recorded 49.2 in August, compared to July’s seven-year low of 45.9, against the no-change reading of 50. Values above 50 indicate growth and those below show contraction.

David Noble, group CEO, CIPS, said: “Purchasing costs went up at a rate not seen for half a decade, as the impact of the weak pound was felt by the construction sector. Firms reduced their purchasing volumes as a result, as new orders and activity continued to fall, though at a more moderate rate compared to last month.”

During August reductions in housing and commercial building activity slowed while civil engineering activity stabilised.

Respondents suggested Brexit uncertainty continued to act as a brake on the construction sector but a number of firms noted sales volumes had been more resilient than expected.

Tim Moore, senior economist at IHS Markit, said: “Despite another month of reduced output, the latest figures can be viewed as welcome news overall after a challenging summer for the construction sector.

“The move towards stabilisation chimes with the more upbeat UK manufacturing PMI data for August and provides hope that the near-term fallout from Brexit uncertainty will prove less severe than feared.”

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