Construction beats lockdown 2 with fastest rise in new orders since October 2014
The latest construction purchasing managers index (PMI) indicated a sustained recovery in UK construction output during November. The sector bucked the trend as new order volumes expanded at the quickest pace for just over six years. However, construction employment trends remained relatively weak and stretched supply chains saw a sharp increase in average cost burdens.
At 54.7 in November, up from 53.1 in October, the headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index (PMI) and pointed to a solid increase in total construction output, although the rate of growth remained so er than the peak seen in July.
All three broad categories of activity saw higher output in November. Construction companies indicated that house building was the best-performing area in November (index at 59.2), despite the rate of growth easing since October. Civil engineering returned to growth in November (52.3), while commercial work increased only marginally (51.9) and at the slowest rate for six months.
Rising demand for construction products and materials placed additional pressure on supply chains in November. This was signalled by another sharp lengthening of lead-times among vendors. Survey respondents often commented on transport delays and stock shortages.
Tim Moore, Economics Director at IHS Markit, which compiles the survey: “UK construction output stayed on a recovery path in November and there were signs that the main growth driver has transitioned from catch-up work to new projects. The latest increase in new orders was the strongest since late-2014, with construction firms reporting a boost from rising client confidence and the release of budgets that had been held back earlier in the pandemic.
“Supply chain challenges remain on the horizon, as signalled by another sharp lengthening of lead times for construction products and materials. Transport delays and low stocks among suppliers were reported by construction rms in November, which led to the fastest increase in purchasing costs for over one-and-a-half years.”
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply: “The energy behind (the rise in output) was primarily the housing sector. Despite this accelerated improvement overall, the employment picture remained cheerless. In a bid to dampen down the effects of the sharpest rise in input costs since April 2019, builders were reducing headcounts to keep their own heads above water leading to another fall in job numbers. As more work fills the sector’s pipelines, the necessity to recruit is likely to become more urgent, and the shortfall could be reversed barring further disruption.”
Around 51% of the survey panel forecast a rise in business activity during the year ahead, while only 16% predict a decline. The resulting index pointed to the strongest degree of business optimism across the construction sector since January.
