Construction costs rise as sector expands at fastest rate for four months

Will Green is news editor of Supply Management
3 March 2015

Input prices for the construction sector experienced a “steep and accelerated rise” in February following the sharpest expansion in activity for four months.

At the same time subcontractor costs rose at the fastest rate in almost 18 years, while vendor delivery times lengthened to the greatest degree since October 2014.

The Markit/CIPS UK Construction Purchasing Managers’ Index hit 60.1 in February, up on 59.1 in January and above the 50 mark indicating growth for the 22nd consecutive month.

Higher levels of activity were seen across the housing, commercial and infrastructure categories and strong demand for materials, coupled with stock shortages at suppliers, contributed to the rise in input prices.

Construction companies mostly linked new business gains to improving economic conditions, with 51 per cent predicting a rise in activity over the next 12 months, but some respondents said uncertainty around May’s General Election had resulted in spending decision delays among clients.

David Noble, group CEO, CIPS, said: “As the sector revives a little more after the devastating effects of the recession, supply chains are experiencing increased pressure and vendors are struggling to keep pace resulting in longer delivery times. Generally worldwide, commodity prices have been falling, but the sector is experiencing strong demand for quality materials and so supply continues to be challenging.”

Tim Moore, senior economist at Markit, said: "Stronger short-term growth momentum in February was matched by positive sentiment towards the year-ahead business outlook. However, some construction companies noted that the uncertain General Election outcome could prove a temporary bump in the road for new work, as some clients had sought to delay spending decisions."

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