Construction buyers report fastest rise in output since May 2017
The IHS Markit/CIPS UK Construction Purchasing Managers’ Index rose to 55.8 in July from 53.1 in June signalling the fastest rise in overall construction output since May 2017.
Commercial activity was also at a 31-month high while civil engineering was more subdued but still at a 12-month high.
Supply chain pressures continued in July, which contributed to another sharp lengthening of delivery times for construction products and materials. However, input cost inflation moderated from the nine-month high seen in June.
Survey respondents commented on improving demand conditions, higher volumes of new project starts and, in some cases, a degree of catch-up from the bad weather earlier in 2018. Construction companies also noted that a lack of work to replace completed projects (particularly railway infrastructure work) continued to hold back growth in the civil engineering sub-sector.
Tim Moore, associate director at IHS Markit and author of the report, said: “July data reveals an impressive turnaround in the performance of the UK construction sector, with output growth the strongest for just over one year.
“While the recent rebound in construction work has been flattered by its recovery from a low base earlier in 2018, there are also signs that underlying demand conditions have picked up this summer.”
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, added: “Favourable circumstances lay the foundations for success with an easing in cost pressures to a three-month low and a rekindled enthusiasm from clients to place orders held back by uncertainty.
“Residential and commercial building took the overall lead with the most robust performances since December 2015 and even civil engineering put on a slightly better show.
“The fly in the ointment was longer lead-times across the construction supply chain. Rising demand meant that supply chains creaked under the strain and delivery times lengthened to the greatest extent seen in 12-months. Material shortages, limited inventories and capacity pressures bore down, as constructors caught up on previous weather delays and stocked up for new orders.
“Looking ahead, though optimism remains at lower than average levels, with the biggest rise in job creation since December 2015, there’s some conviction that the future is brighter, at least in the short-term. Bearing in mind the sector has experienced a number of twists and turns over the last couple of years, we must all remain watchful for any return to uncertainty as Brexit approaches.”