Construction growth picked up in April, driven by work on civil engineering projects, according to the latest Markit/CIPS UK Construction Purchasing Managers’ Index (PMI). However supplier lead time are lengthening and demand for construction materials and upward pressure on costs from sterling depreciation resulted in another steep increase in input prices during April.
At 53.1, up from 52.2 in March, the seasonally adjusted PMI pointed to a solid rise in overall construction output. The latest reading was well below the post-crisis peak seen in January 2014 (64.6), but still signalled the sharpest rate of expansion so far this year. Civil engineering was the best performing sub-category of construction activity in April, with the rate of expansion the fastest since March 2016. Growth of residential building also accelerated, reaching a four-month high. Commercial building work increased only slightly and at a weaker pace than in March.
April data pointed to a solid upturn in new work received by UK construction companies, with the rate of expansion the strongest seen so far this year. However, mirroring the trend seen for business activity, the latest upturn in new work remained much slower than seen at the peak phase of the recovery in early-2014.
Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI, said:“April’s survey reveals a positive start to the second quarter of 2017, with a robust upturn in civil engineering activity helping to boost the construction industry. There were also more encouraging signs from the house building sector, as growth recovered to its strongest so far this year. However, the performance of the commercial building sector remained subdued in the context of the past four years.
“UK construction companies noted that the resilient economic backdrop helped to drive up client spending in April. Greater workloads led to the fastest pace of job creation since May 2016 and a continued squeeze on sub-contractor availability.
“Supply chain pressures also intensified, as highlighted by the largest lengthening of delivery times for almost two years. A sharp rate of input cost inflation persisted in April, reflecting an ongoing pass through of higher commodity prices, imported goods and energy costs. However, the recent recovery in sterling may have started to help limit some cost pressures in April, as the overall rate of input price inflation moderated to a six-month low.”
Duncan Brock, director of customer relationships at the Chartered Institute of Procurement & Supply, said: “With the biggest rise in new orders since the beginning of the year, the sector is in a strong pre-election position buoyed up by a hardy UK economy and strong client confidence. The housing sectoroffered up the best news recovering from last month’s minor blip and building on its strongest performance since the end of last year.
“Employment growth rose to its highest since May 2016, though continued disquiet about the lack of highly-skilled labour availability persisted and which must be addressed if the future strength of the sector is to be assured. Combined with the vexatious conditions of rising commodity and labour costs, low stocks of essential materials and longer delivery times frustrated buyers and added drag to the completion of planned projects.
“But with only a slight dip in business confidence from last month, the sector has proven to be resilient, so the UK Government must take extra steps to ensure the General Election does not knock the sector back into a period of uncertainty and uneven progression, as seen during the referendum months.”