October growth boosted by fastest new order increase in 12 months

MarkitConstruction buyers have reported another upturn in overall UK construction output for October, alongside the fastest rise in new work for 12 months.

The growth was highlighted in the latest Markit/CIPS UK Construction PMI index report which also showed the highest rate of construction job creation for nearly a year.

Commercial building work was a key growth driver in October, as housing and civil engineering activity both expanded at slower rates than in September. Despite a robust and accelerated rise in input buying, latest data indicated the lowest strain on supplier delivery times for almost five years.

Meanwhile, relatively subdued cost inflation continued in October, helped by falling raw material prices (especially metals).

The index registered 58.8 in October, which was down from 59.9 in September but still well above the 50.0 no-change threshold. As a result, the latest survey marked two-and-a-half years of sustained output growth across the UK construction sector.

Looking ahead, construction companies remain highly upbeat about their prospects for growth over the next 12 months, with more than half (59 per cent) forecasting a rise in business activity and only 7 per cent expecting a decline. Anecdotal evidence cited an encouraging number of new invitations to tender and expectations of solid spending levels among key clients.

Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI , said: “October’s survey indicates that the UK construction sector remains firmly in expansion mode, although commercial building work was the only category to experience faster growth than in September. “Another relatively buoyant construction PMI reading indicates that the sector remains in rude health. Rather than acting as a drag on the economy, as suggested by recent GDP estimates, the sector is continuing to act as an important driving force behind the ongoing UK economic upturn. “Construction companies also noted a rebound in new business flows during October and responded to rising workloads by taking on extra staff at the fastest rate for almost a year. Shortages of skilled staff persisted as a result, with the current period of falling sub-contractor availability the longest seen in over a decade.”

David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, added: “Supplier performance deteriorated to the least marked extent for almost five years in October, as capacity was increased to meet an upsurge in purchasing activity – the strongest for nine months. “Prompted by a rise in new orders, pipeline work, low raw material costs and more marketing activity, the sector also experienced the speediest expansion in staffing levels since November 2014 to meet this increased volume of contract demands. “With sustained growth now for two-and-a-half years, respondents also reported more confidence in the sector and from clients, and an expectation of an even stronger performance next year.”

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