Key findings from the latest Markit/CIPS UK Construction PMI report have shown that business growth eased in March because of a slower housing sector despite a rebound in commercial work.
March data revealed a slowdown in growth across the UK construction sector, led by a weaker rise in residential building activity. The latest survey also pointed to only a marginal increase in new work, which contributed to slower employment growth and a slight decline in input buying. However, construction companies remain relatively upbeat about their near-term growth prospects, partly reflecting a stabilisation of client confidence from the post-referendum lows seen in 2016. Optimism regarding year-ahead business activity picked up in March to its second-highest since December 2015.
Tim Moore, senior economist at IHS Markit, said: “UK construction firms experienced a growth slowdown in March, with the loss of momentum centred on housebuilding. A weaker trend for residential work has been reported throughout 2017 so far, which provides an indication that the cooling UK housing market has started to act as a drag on
the construction sector.”
Duncan Brock, director of customer relationships at the Chartered Institute of Procurement & Supply, said: “Where the housing sector acted as the main engine of growth over the last four years, this month it was slower and stuttering, while overall purchasing activity in the construction sector was disappointingly tame, shackled by a lack of new orders and rising costs.
“This downbeat effect took a small bite out of any strong rises in employment levels, as the increase in staff hiring was at a three-month low. But as the sector showed strong optimism for future business, concerns over the skilled labour availability are likely to persist in coming months.
“Pressure on suppliers remained intense, as they battled against lower stocks and made greater efforts to fight the pincer movement of a shortage in some materials and the continued force of higher global commodity prices.
“Now the trigger has been pulled to propel the UK out of the EU, the construction sector must keep an attentive eye on how the UK Government’s negotiations will play out and whether consumer and business caution returns to hamper further progress.”
The seasonally adjusted PMI dropped from 52.5 in February to 52.2 in March, to signal the joint-slowest upturn in overall construction output since the current period of expansion began in September 2016. Construction companies recorded a solid increase in employment numbers in March, although the pace of job creation eased to a three-month low. Meanwhile,sub-contractor usage dipped slightly since February,but construction firms continued to report a sharp drop in the availability of sub-contractors.
Input buying declined for only the second time since September 2016, which was mainly linked to subdued new business growth in March. Supplier performance nonetheless deteriorated at one of the fastest rates seen over the past two years, driven by low stocks among vendors.
Input cost inflation remained strong in March, linked to higher prices for imported materials and global commodity price rises. However, the overall rate of cost inflation eased further from the eight-and-half year peak seen in January.