Construction buyers report loss of momentum in January
Despite this, respondents to the latest Markit/CIPS survey signalled that confidence regarding the year-ahead outlook picked up to its strongest since December 2015, largely reflecting new project starts and a resilient economic backdrop.
The survey also recorded strong staff hiring activity at the start of 2017 with employment numbers growing as the fastest rate for eight months, while subcontractor usage also rose at the steepest pace since December 2015.
It also flagged up concerns about rising prices for imported materials in a mixed picture for contractors.
The seasonally adjusted Construction Purchasing Managers’ Index registered 52.2 in January, down from 54.2 in December
Housing, commercial and civil engineering recorded softer rates of output growth in January
Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI, said: “UK construction firms experienced a subdued start to 2017, with all the key categories of activity losing momentum.
“While housebuilding retained its position as the fastest growing part of the construction sector, the latest upturn was the weakest since the post-referendum rebound emerged in September 2016.
“New business volumes also expanded at a softer pace in January, but there were more positive trends in terms of staff hiring and business optimism regarding the year-ahead outlook.
“The latest survey revealed an accelerated rise in payroll numbers at construction companies, as well as the fastest upturn in sub-contractor usage since the end of 2015. A number of survey respondents commented on a boost to their workloads from the resilient economic backdrop, alongside a strong pipeline of new project starts in 2017.
“Meanwhile, the weak pound continued to have an inflationary impact on the UK construction sector in January. Purchasing costs increased at the strongest rate for almost eight-and-a-half years, as suppliers sought to pass on higher prices for commodities and imported construction materials.”
David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, said: “Despite the biggest rise in input costs since August 2008, the sector was in buoyant mood at the start of the year, with highest level of confidence since December 2015.
“Continuing cost pressures from the weak pound and escalating commodity prices failed to impact significantly on purchasing volumes, as input buying increased following last month’s slight fall while job creation rose to an eight-month high. Previously stalled projects and plans were given the go-ahead as the sector ensured sufficient staff resource was in place to meet future demand.
“However, the dark cloud on the horizon was the continuing pressures on supply chains. Material shortages, lengthening delivery times and supplier performance, the weakest since June 2015, could become a roadblock to the sector’s continuing growth.
“In the short term at least, the outlook is positive, as long as economic conditions remain supportive and firms are able to control their rising costs.”