The latest data from Markit/CIPS UK Construction PMI has signalled a strong overall performance for the UK construction sector, with sharp rises in activity and employment maintained during the latest survey period. Although concerns are growing about rising costs and sub-contractor availability.
Adjusted for seasonal factors, the Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) posted 62.5 in March, little changed from 62.6 in the previous month but lower than the near six-and-a-half year high recorded during January (64.6). Nonetheless, the latest reading signalled a steep overall expansion of UK construction activity, and the index has now registered above the 50.0 no-change value for 11 months in a row.
Input buying continued to increase sharply and cost inflation remained strong in March. There were further signs of strains on supply chains, as delivery times for raw materials lengthened to the second-greatest extent since July 1997, exceeded only by the deterioration experienced last November. There were widespread reports that pressures on supplier capacity had resulted in longer lead-times. Meanwhile, construction firms also indicated that sub-contractor availability decreased at the fastest pace since September 2000.
David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said: “The rapid pace of expansion, which started last summer, is continuing to stretch resources and supplier capacity, with delivery times lengthening to a level seen only once since July 1997. Supply constraints have now been around for a long time, and with rising cost inflation, are a growing concern that could hold the sector back.”
Housing activity regained its place as the best performing category of construction in March, driven by improving underlying demand across the sub-sector. The upturn in residential construction growth partly reflected a rebound in output following some weather-related disruptions in the previous month.
Commercial construction activity continued to rise sharply amid improving economic fundamentals, with the pace of expansion again close its fastest since the summer of 2007.
Volumes of new work increased for the eleventh successive month in March, although the rate of expansion eased to its least marked since September 2013. Increased work on new projects contributed to a sharp rise in employment numbers across the construction sector. The rate of job creation picked up over the month and was the second-fastest since August 2007.
Increased staffing levels were partly linked to improving confidence about the outlook for construction activity over the next 12 months. The degree of positive sentiment was the highest since January 2007, with around 59% of survey respondents anticipating a rise over the year ahead and only 5% forecasting a reduction.
Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI, said: “House building reclaimed its place as the main driving force behind the resurgent UK construction sector in March, following some weather-related disruptions during the previous month.
“However, the latest survey does little to dispel concerns that supplier capacity will become a fly in the ointment. Lead-times for the delivery of construction materials lengthened in March by one of the greatest amounts since the survey began in April 1997, while sub-contractor availability fell at the fastest rate for thirteen-and-a-half years.”