Construction output growth accelerates to a seven-month high in September

CIPS 2 October 2015

Job creation picks up to a three-month high 
Job creation picks up to a three-month high 

Markit/CIPS UK Construction PMI®

 Key points:

  • Output growth rebounds across all three sub-categories of activity...
  • ...led by fastest rise in residential building for 12 months
  • Job creation picks up to a three-month high 

September data pointed to a further rebound in output growth across the UK construction sector, supported by faster rates of expansion in all three categories of activity monitored by the survey. Greater workloads and positive sentiment regarding the business outlook contributed to a sharp increase in staffing levels during September. However, new business growth continued to ease from June’s recent peak, with the latest upturn in new work the weakest for five months. Meanwhile, construction companies indicated the least marked lengthening of suppliers’ delivery times since November 2010, which provided further evidence that supply chain pressures have subsided in recent months.

At 59.9 in September, up from 57.3 in August, the headline seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI®) signalled a sharp and accelerated expansion of overall business activity. Moreover, the latest reading was well above the long-run survey average (54.7) and pointed to the fastest increase in output levels since February.

House building remained the best performing broad category of construction activity in September. The latest expansion of residential building was the strongest for 12 months, which some survey respondents attributed to the launch of development projects that had been delayed earlier in 2015. Commercial construction activity also rose sharply in September, with the pace of growth accelerating to a seven-month high. Meanwhile, civil engineering activity increased for the fifth consecutive month and the rate of expansion picked up to its fastest since February.

Volumes of new work rose at a robust pace in September. However, the latest increase was the slowest for five months and much weaker than the post-crisis peaks recorded in 2013 and 2014. Construction companies nonetheless remain highly upbeat about their prospects for output growth over the next 12 months. Reflecting this, more than half of the survey panel (52%) forecast an upturn in business activity, while only 6% anticipate a reduction.

Employment growth was sustained across the construction sector for the twenty-eighth month running in September. Moreover, the pace of staff hiring remained strong, and accelerated to its fastest since June. At the same time, construction firms signalled another increase in sub-contractor usage during September. Sub-contractor charges continued to rise sharply, although the rate of inflation has eased slightly from the survey-record highs recorded earlier in 2015.

Meanwhile, the latest survey highlighted the least marked deterioration in supplier performance for almost five years, which some firms linked to greater stocks at vendors. September data also pointed to softer cost pressures, with the rate of input price inflation easing to a five-month low. 

Commenting on the report, David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, said: 
“The building blocks were firmly in place this month as the sector reported more work, rising staff levels, and strong optimism for the future.

“Though the overall growth rate of new business was showing signs of slowing down, all three sectors offered positive news with residential housing the strongest performer. 

“Issues around skills shortages continued to be a drag on the sector with the resultant demand for higher salaries from the smaller pool of skilled staff. Companies reported higher staffing levels but it was a continuing challenge to find specialist skills as they struggled to rely less on sub-contractors to fill the gaps.

“Lower fuel and raw material costs helped margins even in a landscape of strong competition. Levels of output were robust and increased at the fastest pace for over six months.” 


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