Construction sector purchasing boost dampened by coronavirus worries

3 March 2020

UK construction has returned to growth but the coronavirus has cast a shadow over the sector, according to the latest PMI.

After the manufacturing PMI showed similar mixed results, the IHS Markit/CIPS UK Construction Purchasing Managers' Index revealed a return to fortunes, with construction companies reversing nine-months of declining workload, to hit 52.6 in February, up from 48.4 in January.

The rise represents the first movement above a 50 – which signals neither contraction nor expansion – since April 2019, with the overall rate of construction output growth being the fastest for 14 months. Both commercial and residential work returned to growth, and increases in new work were at their steepest recorded rates for more than four years. 

But once again, coronavirus is casting a long shadow, with analysts unsure how long term these gains will be. 

Duncan Brock, group director at CIPS, said a sudden rise in purchasing had taken many suppliers by surprise, putting them on the back foot in terms of re-stocking, and the spectre of coronavirus severely derailing supplies could not be discounted.

He said: “The resurgence in levels of new work at the fastest rate since December 2015 was a surprising, but much-needed development for a sector that was on its knees. But delivery times and stocks of raw materials are coming under pressure. Should there be another sudden rise in purchasing activity this month, we are likely to see more challenges in supply chains, until suppliers have a chance to catch up.” 

He added: “Given the slowdown in the global economy and potential coronavirus impacts, the sector could struggle to maintain February’s strong performance and may experience slower progress as we head into spring.”

Concern was shared by Tim Moore, economics director at IHS Markit, who said: “The UK construction sector has started to rebound, with pent-up demand prior to the general election released, boosting house building, commercial construction projects and civil engineering. But the fly in the ointment is the uncertain impact of the coronavirus outbreak on UK economic growth prospects.” 

He added: “A renewed slowdown could see domestic investment spending put back on hold and dampen the outlook for the UK construction sector.”

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