The latest Markit/CIPS UK Construction Purchasing Managers’ Index covering November shows that overall construction activity has risen for the seventh month in a row, residential construction growth is strongest for ten years and there has been a sharp increases in new orders and employment.
November data pointed to another strong upturn in the UK construction sector, with output and employment both rising at the sharpest rate since August 2007. Growth of business activity was broad based across the three main areas of construction, with residential building again the best performing category. Higher levels of output were supported by the joint-fastest expansion of incoming new work since September 2007.
Adjusted for seasonal factors, Markit/CIPS index registered 62.6 in November, up sharply from 59.4 in October and above the 50.0 no-change mark for the seventh successive month. The latest reading was well above the long-run series average (54.1) and indicated the steepest expansion of overall business activity for just over six years.
Construction companies pointed to a steep and accelerated expansion of house building activity in November, with the rate of growth the fastest for ten years. Work on commercial construction projects also increased sharply during the latest survey period, and the rate of expansion was the steepest since September 2007.
Anecdotal evidence from survey respondents widely pointed to more favourable business conditions in November, with rising confidence in the economic outlook and improving credit conditions helping to boost spending across the construction sector. As a result, volumes of new work increased at a strong and accelerated pace, with the latest rise in new orders the joint-sharpest for just over six years.
Moreover, construction companies pointed to greater optimism regarding the year-ahead business outlook. The balance of firms anticipating a rise in output was the highest since September 2009, reflecting widespread expectations that the overall business climate will continue to improve during the 12 months ahead.
Higher levels of new work contributed to sharp rises in both employment and purchasing activity across the construction sector during November. Increased input buying and net job creation have both now been recorded for six consecutive months, and in each case the latest expansion was the fastest for just over six years.
Input price inflation persisted in November, with the latest rise in average costs the strongest since August 2011. Higher cost burdens reflected strong demand for inputs and associated supply-chain pressures across the construction sector, as highlighted by the sharpest deterioration in delivery times from vendors since July 1997.
Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI, said: “Construction activity continues to spring back to life during the final months of 2013. Sustained improvements in infrastructure and residential building helped keep the sector on a strong recovery path in November.
“That said, construction growth is still coming from a low base as output levels rebound from a deep and protracted double-dip recession that only really ended this summer.
“Therefore, while construction’s current growth trajectory may be the steepest for over six years, there is still a huge loss of output to recoup before the sector reaches its pre-recession peak. Looking ahead, there are a number of positive signs that improvements in activity levels will be maintained, as job creation picked up again in November and confidence about the business outlook reached its highest level since September 2009.”
Commenting on the report, David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said: “As seen in previous months, suppliers are struggling to keep up with the sharp surge in demand; stocks are being squeezed and delivery times continue to lengthen, to the greatest degree since 1997. Along with increasing cost burdens, there are worries that this will have an impact on output; despite this construction firms are confident this won’t hold them back in the New Year.”
Chris Temple, PwC UK Engineering & Construction leader, said: “House building continues to be the success story of the construction revival although it is only a small part of the sector. The general growth trajectory in construction is at its steepest for over six years, but we must remember that the sector is still way below the pre-recession peak.
“The mood among my clients is one of rising confidence and an acknowledgement that credit conditions are improving. The continued availability of credit will be vital to boost spending across the sector and support the return to pre-recession figures.”