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Markit/CIPS  UK Construction Purchasing Managers’ Index (PMI) June survey data signalled increasing new order volumes and a boost in operating capacity which contributed to the steepest rise in employment levels since the PMI survey began

At 62.6 in June, the seasonally adjusted PMI index picked up markedly from a seven-month low of 60.0 in May. The headline index has now posted above the 50.0 no-change threshold for 14 months running and the latest reading signalled the strongest pace of overall output growth since February.

Residential construction remained the best performing area of activity during June. The latest rise in housing activity was the steepest since January. Meanwhile, commercial building activity also increased at the most marked pace for five months in June, which survey respondents linked to improving economic conditions and greater confidence about the business outlook.

Stronger demand for new construction projects in turn led to a rapid increase in staffing levels, with the rate of job creation accelerating to its sharpest since the survey began over 17 years ago.

Construction companies remained highly upbeat about the outlook for business activity over the year ahead, reflecting strong new order inflows and favourable economic conditions. That said, the degree of positive sentiment slipped to a six-month low in June, with some panel members noting an increased risk of interest rate rises over the next 12 months.

Meanwhile, sharp rises in costs across the construction sector contributed to a further marked deterioration in the performance of product suppliers. Survey respondents widely commented on low stocks and a lack of spare capacity at suppliers.

Strong demand for construction materials also contributed to an acceleration in input cost inflation to its highest for six months in June. Moreover, the latest rise in sub-contractor charges was only slightly less marked than the survey-record high seen in May.

David Noble, group chief executive at the Chartered Institute of Purchasing & Supply, said: “Whilst the headline figures this month painted a positive picture, let’s not forget about the underlying pressures on building materials and manpower at supplier levels. Delivery times continued to lengthen a great deal and prices were pushed up. Pressure on suppliers needs to be watched if the sector wants to maintain a steady growth trajectory.”