Construction output growth rebounds at the start of 2015

MarkitThe UK construction sector has enjoyed a positive start to the year with output and new business growth rebounding from the lows seen in December, according to new data.

The latest Markit/CIPS UK Construction PMI index rose to 59.1 from 57.6 in December – reversing a three-month trend of slowing growth.

That said, the rate of job creation slipped to a 13-month low and construction firms’ assessment of the business outlook was the second-lowest seen since October 2013.

All three broad areas of construction activity picked up since December, but in each case the rate of expansion was weaker than the peaks seen in 2014. Residential building was the best performing sub-category in January, with the latest survey marking two years of continuous expansion. Meanwhile, latest data also indicated a robust rise in commercial construction and a rebound in civil engineering activity following the decline recorded in December.

Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, said: “UK construction companies have found their feet again after a protracted slowdown in output growth at the end of 2014. Stronger trends were recorded across housing, commercial and civil engineering, although each category of activity still experienced much slower growth than the high-water marks achieved last year.

“In short, the peak speed of the construction recovery seems to be over, but reports of its death have been greatly exaggerated.

“Expectations in relation to output growth over the next 12 months remained close to December’s low, contributing to a further slowdown in construction sector job creation during January. However, skill shortages persisted at the start of the year, with construction companies indicating that subcontractor charges increased at a near survey record pace.

“Strong demand for construction materials resulted in upward pressure on costs and lengthening delivery times from suppliers in January. That said, the latest survey highlighted that lower fuel and energy prices helped drive down overall cost inflation to its lowest for just under two years.”

David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, said: “After the disappointing end to last year and the drop in the industry’s fortunes, the construction sector has had a perky start with good activity across all sectors.

“Though the month’s activity was well below the highs of the peak recovery months, the modest increase in growth may beat away any wider concerns around an unsustained improvement in the sector’s fortunes. This is borne out by half of the procurement and supply management professionals who were optimistic about the year ahead.

“New orders were up, but staffing levels have yet to catch-up showing at their lowest level of growth for 13 months, which may slow down activity as companies struggle to keep up with new demand. With supply chains under pressure, supply shortages, longer delivery times and a sharp fall in the performance of suppliers, there may still be challenges ahead.

“Falling input prices have helped the sector control spending costs; though the advantage was not as great as for other sectors. Uncertainty about the continued recovery of the wider economy and the possible changes brought on by a looming General Election may keep the sector from performing at the high levels seen this time last year.”

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