Construction companies indicated another strong overall performance in February, despite output and new business growth easing since the previous month. Job creation hit a three-month high and subcontractor prices have begun to rise.

Adjusted for seasonal factors, the Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI®) posted 62.6 in February, down from a 77-month high of 64.6 in January. The index has posted above the 50.0 no-change level in each month since May 2013.

Strong demand for inputs, alongside low stocks at suppliers, led to another marked lengthening of lead times in February. Survey respondents also noted that supply chain pressures had contributed to higher cost burdens, with the overall rate of input price inflation accelerating from the five-month low recorded in January. Moreover, average rates charged by sub-contractors increased at a survey-record pace during February. This reflected a fall in sub-contractor availability for the eighth month running, which is the longest period of decline since that seen in 2007.

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said: “Strong demand is continuing to put pressure at a supplier level, with vendors battling with low stocks and prices increasing as a result. While delivery times are still deteriorating, they are at least doing so at the slowest rate since August 2013, suggesting that the very worst of the squeeze has passed.”

Anecdotal evidence in the drylining and plastering sector indicates that growth pressures are begining to spread beyond the south east.

Reports from survey respondents suggested that disruptions related to adverse weather conditions had contributed to softer construction output growth in February, especially house building activity.

Residential construction increased sharply in February, but at the slowest pace for four months. Growth of commercial activity also eased in February, and was the least marked since November 2013.

February data indicated a sharp rise in new work although the pace of expansion eased to the slowest for four months. Anecdotal evidence cited strong client demand for new projects, but there were some reports that unusually wet weather had a disruptive influence on sales during the latest survey period.

Higher levels of output and new business resulted in further sharp increases in both employment and purchasing activity across the construction sector. The latest rise in staffing levels was the fastest for three months, which some respondents linked to robust confidence about the business outlook. Around six times as many construction companies (59%) expect a rise in output over the year ahead as those that forecast a reduction (10%). There were widespread reports that improving economic conditions and greater invitations to tender had supported optimism about future business activity.

Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI®, said: “While some froth has come off overall construction growth in February, the latest data showed that job creation picked up to a pace rarely seen since the summer of 2007.