UK construction experienced a sharp rebound in business activity during May, helped by the fastest upturn in residential work since the end of 2015. The latest IHS Markit/CIPS UK Construction PMI survey also revealed a sustained recovery in new work, following the soft patch seen during the first quarter of 2017.
May’s PMI survey data reveals that the UK construction sector has started to recover strongly from its slow start to 2017. Increased workloads also encouraged greater staff recruitment and a marked expansion of input buying across the construction sector. Meanwhile, imported materials have pushed up cost but the overall rate of input price inflation eased.
Tim Moore, Senior Economist at IHS Markit and author of the Markit/CIPS Construction PMI, said: “House building was the key growth driver, with work on residential projects rising at the fastest pace since December 2015. A sustained rebound in residential building provides an encouraging sign that the recent soft patch for property values has not deterred new housing supply. Instead, strong labour market conditions, resilient demand and ultra-low mortgage rates appear to have helped boost work on residential development projects in May.
“Civil engineering continued to flourish, however, commercial building was trapped in the slow lane amid reports highlighting that heightened economic uncertainty is holding back client spending.”
Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply, said: “After years of sluggish house building, the construction sector has snapped back into action in May. Construction growth has surged to a 17 month high as the uncertainty caused by the EU referendum appears to be abating.
“The rapid upturn in production is putting considerable pressure on construction supply chains. Suppliers are struggling to meet demand while there is a growing shortage of contractors to complete work. After the experience of the financial crisis, it may be some time before risk aversion fully recedes and suppliers have more confidence to invest in their capacity. Only time will tell whether we are witnessing a long awaited resurgence in housebuilding.”
While the headline index signalled robust growth momentum during May, the latest reading was still much weaker than the post-crisis peak seen in January 2014.
The rate of job creation accelerated for the second month running to its strongest since January 2016. Mirroring the trend for staff recruitment, latest data showed that input buying expanded at the steepest pace for 16 months in May.
A rebound in demand for construction materials placed pressure on supply chains in May, with delivery times lengthening to the greatest extent since March 2015. However, the were more positive developments in terms of cost inflation, as overall input prices rose at the slowest pace for seven months. Survey respondents reported that the weak exchange rate had led to intense negotiations with suppliers, but some noted that the peak phase of price hikes for imported materials had now passed.