Markit/CIPS UK Construction PMI®
- Business activity rises for the first time since May
- Solid upturn in housing activity offsets decline incommercial work
- Fastest increase in new orders for six months
September data highlighted an upturn in businessactivity across the UK construction sector for thefirst time since May, primarily driven by a recoveryin residential building. New orders also reboundedduring September, which ended a four-monthperiod of sustained decline.
Survey respondents cited improving confidenceamong clients and a reduced drag on demandfrom Brexit-related uncertainty. Reflecting this,construction firms indicated a further recovery intheir business expectations for the next 12 months, with optimism the strongest since May.Just under half of the survey panel (45%) forecasta rise in output over the year ahead, while only 9%anticipate a reduction. However, the degree ofconfidence remained softer than that seen at thestart of 2016.
Adjusted for seasonal influences, the Markit/CIPSUK Construction Purchasing Managers’ Index® (PMI®) registered 52.3 in September, up from 49.2in August and above the 50.0 no-change value forthe first time in four months. The latest readingwas well above July’s seven-year low andindicated the fastest rise in construction outputsince March. The pace of expansion wasnonetheless still softer than the long-run surveyaverage (54.6).A solid rebound in residential activity was thekey factor boosting overall construction outputduring September. Moreover, the latest increase inhousing activity was the strongest recorded sinceJanuary. A number of firms cited resilient demandfor residential building work and generallyimproving market conditions.
Construction companies pointed to a renewed risein civil engineering activity, with the pace ofexpansion the fastest since March. Commercial construction activity decreased for the fourthmonth running, which is the longest period ofsustained decline since early-2013. However, thelatest fall was only modest and the slowestrecorded since the downturn began in June.
Higher levels of overall construction activity weresupported by a rise in new work for the first timesince April. Anecdotal evidence suggested that signs of improving domestic economic conditions,and an upturn in housing-related demand inparticular, had contributed to greater volumes ofincoming new work in September. This in turn ledto a further moderate rise in employment levelsacross the construction sector, although subcontractorusage continued to fall at one of thefastest rates since late-2013.
Mirroring the positive trends seen for businessactivity and new work, latest survey datahighlighted a return to rising input buying acrossthe construction sector. Meanwhile, constructioncompanies indicated that supply chain pressureseased in September, with the latest deterioration in vendor performance the least marked seen foralmost six years.There were again widespread reports thatexchange rate depreciation had pushed up thecost of construction materials during September. Anumber of survey respondents noted that domesticsuppliers had sought to pass on higher importedraw material costs. Although easing since August,the rate of input price inflation was close to thehighest for two years.
David Noble, Group Chief Executive Officer atthe Chartered Institute of Procurement & Supply,said:“The residential sector was the winner this month,as consumer confidence made a modest recovery, post the EU referendum.
“Overall, the fastest rise in new orders for construction projects since April ended a four month decline, and purchasing activity was at its highest since March. But, though there were modest rises in staffing levels, these were at one of the weakest rates in the last three years.
“Supplier delivery times recovered at a moderate rate, as higher stocks of building materials were reported and business optimism improved, ending a 39-month low. But, the sector still faces challenges with continuing pressures on input prices resulting from the weaker pound and the lingering uncertainty of the Brexit process and how it will impact on future business.”
Trudy SalandiakTel: +44 1780 761576
The October UK Construction PMI will be published on Wednesday November 2 2016 at 09:30 UK / 08:30 UTC.