House building leads modest construction recovery
House building recovery after the Beast from the East disruption underpins modest construction rebound in April according to the latest IHS Markit/CIPS UK Construction PMI survey. The key finding from the April survey reveal that construction activity increased at fastest pace for five months, with residential work expanding at strongest rate since May 2017. New orders increased slightly in April.
IHS Markit/CIPS April data indicated a moderate recovery in construction output following the weather-related disruptions seen during March. House building was the main category of activity to experience robust growth in April.
However, there were signs that underlying demand across the construction sector remained subdued, with total new work rising only marginally in April. The increase in new business was the first recorded by the survey so far in 2018.
Tim Moore, associate director at IHS Markit and author of the IHS Markit/CIPS Construction PMI, said: “A rebound in construction activity was pretty well inevitable after snowfall during March. House building led the way, with growth in April among the strongest seen over the past two-and-a-half years. However, the picture was less positive in other areas of construction, with commercial building and civil engineering work rising only marginally.
“A consistent theme so far this year has been fragile demand conditions and subdued volumes of incoming new work. Survey respondents noted that heightened economic uncertainty continued to hold back construction growth in April, with risk aversion among clients leading to delays with spending decisions on new projects.”
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said:“Economic uncertainty and Brexit-related indecision continue to lurk beneath the surface as obstacles to the construction sector’s stability. New orders remain too few and far between, with just a small improvement in the level of extra work reported this month.
“The effects of the previous month’s bad weather were echoed in April as supply chains stayed under the cosh again. Besieged by raw material stock shortages and capacity difficulties, suppliers tried to catch up on their delivery commitments with limited success. Transportation times were still lengthy for construction materials for projects already in the pipeline.”
At 52.5 in April, the seasonally adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) picked up sharply from the 20-month low seen in March (47.0). The latest reading was the highest since November 2017 and signalled a moderate expansion of overall construction output.
The rate of new business expansion was only marginal. Anecdotal evidence cited heightened economic uncertainty and subdued confidence among clients in April. In some cases, construction firms noted that a knock-on impact from unusually bad weather conditions had contributed to delays with sales completions during the latest survey period.
Employment numbers increased for the twenty-first month running in April. Survey respondents noted that new project starts and an expected increase in workloads had underpinned job creation at their business units. Moreover, latest survey data indicated that construction firms are relatively upbeat about the 12-month business outlook, with the degree of confidence the strongest recorded since May 2017.
Reports from survey respondents suggested that higher fuel costs and increased prices for steel-related inputs were key factors pushing up operating expenses in April.
