Construction Output Growth Reaches Seven-Month High in June

The seasonally adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index posted 53.1 in June, up from 52.5 in May and above the 50.0 no-change value for the third month running. The latest reading pointed to the sharpest overall rise in construction output since November 2017.

Residential work remained the best performing area of activity. Commercial building also contributed to the stronger overall rise in construction output, with this category of work expanding at the fastest pace since February. At the other end of the scale, civil engineering activity rose only slightly in June, with the rate of growth easing to a three-month low. Survey respondents noted that a general improvement in client demand had helped to boost construction workloads in June.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said: “With the fastest rise in new orders since May 2017, it appears the brakes are off for the construction sector. Despite being hampered by economic uncertainty, firms reported an improved pipeline of work as clients committed to projects and hesitancy was swept away.”

Latest data indicated a solid rebound in new order volumes following the decline seen during the previous month. The rate of new business growth was the strongest for just over one year in June. Higher levels of new work contributed to faster increases in employment numbers and purchasing activity during June.

The pace of job creation accelerated to its strongest for one year, while the latest rise in input buying was the steepest since December 2015. Construction companies noted that greater purchasing activity reflected new projects starts and, in some cases, forward purchasing of inputs to mitigate forthcoming price rises from suppliers.

Average cost burdens increased at a sharp and accelerated pace in June. The latest increase in input prices was the steepest for nine months, which construction companies attributed to greater transportation costs and higher prices for metals (especially steel). Meanwhile, vendor lead times lengthened again in June, driven by low stocks and capacity constraints among suppliers. UK construction companies indicated a rebound in business optimism from May’s seven-month low, although the degree of positive sentiment remained much weaker than the long-run survey average. Survey respondents cited infrastructure work as a key source of growth in the coming 12 months.

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