Weakest rise in construction output for six months in September
Author: ross sturley cimcig
UK construction companies indicated a sustained increase in business activity during September, but the rate of expansion slowed for the second month running.
At 52.1 in September, down from 52.9 in August, the seasonally adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index signalled the weakest upturn in output for six months. Civil engineering was the worst performing sub - category of construction work, with activity declining at a slightly quicker rate in September. House building and commercial construction continued to increase at a solid pace, although the latest survey indicated weaker growth than in August.
A number of firms suggested that subdued economic conditions so far in 2018 remained a factor holding back business activity growth. In contrast to the trend seen for construction output, latest data pointed to a faster rise in new business volumes. The rate of new order growth picked up to its strongest since December 2016, which firms attributed to resilient demand and an upturn in new invitations to tender. A robust rise in staffing numbers was reported in September, helped by another improvement in new order books.
The latest increase in employment was the fastest since December 2015. Sub - contractor usage also increased at the fastest pace for over two - and - a - half years. Survey respondents noted that their own payrolls had been boosted by a larger than usual intake of trainees and apprentices in September. There were also some reports that tight labour market conditions had led to a strategic focus on long - term hiring policies.
Delivery times for construction products and materials continued to lengthen in September. Intense supply chain pressures were attributed to stock shortages at vendors and stretched transportation capa city. That said, the latest downturn in vendor performance was slightly less marked than the three - and - a - half year low seen during August. Rising demand for inputs contributed to a sharp and accelerated increase in average cost burdens during September.
The overall rate of input price inflation was the fastest for three months. Survey respondents widely cited higher fuel prices and greater raw material costs (particularly timber). September data indicated a further decline in optimism about the year ah ead business outlook. The degree of positive sentiment reported by survey respondents was the second - lowest since February 2013. Construction companies noted that political uncertainty and investor concerns about Brexit had dampened confidence in September . Where a rise in business activity was projected, forthcoming energy and transport projects remained the main areas of optimism.
Comments Tim Moore, Associate Director at IHS Markit and author of the IHS Markit/CIPS Construction PMI: “ UK construction firms experienced softer output growth during September, w ith house building , commercial and civil engineering all losing momentum. A lack of new work to replace completed projects meant that civil engineering saw an overall decline in activity for the second month running and remained the main laggard . “
"There were mixe d signals in terms of the near - term outlook . New order books strengthened to the greatest extent since December 2016, which i ndicates that construction workloads remain on an upward trajectory . Rising demand and t ight labour market conditions led to robust job creation , with su r vey respondents comment ing on a larger - than - usual uptake of apprentices in Septembe r.
“ However, latest data showed that overall confidence about the year - ahead business outlook was among the lowest s een s ince the start of 2013 . Construction companies continued to note that political uncertainty acted a key drag on d ecision - making , with Brexit worries encoura ging a wait - and - see approach to spending among clients . The main areas r eported as likely to see a boost in the coming y ear were construction work related to large - scale energy and transport projects . ”
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply , said : “ Despite the biggest rise in new orders since December 2016, the sector remained in a downbeat mood with business optimism at its second lowest level since the beginning of 2013.
“ A cause of this malaise pointed to increased cost burdens with both fuel prices on the rise, and acute shortages in raw materials, as supplier delivery times have lengthened to an extent not seen since 2015. The Brexit blot on the landsc ape was still in evidence as housing activity slowed to a pre - April growth rate and clients hesitated to place orders. Civil engineering was hit the hardest however and under 50 for the second month in a row, which points towards anot her contraction .
“ Workforce planning was not held back however, as the sector kept an eye on the future and increased operating capacity with the biggest rise in job creation since December 2015. Though the struggle for talent remained a nd many of the opportunities were for entry - level apprentices.
“ This tale of feast and famine offers little in the way of reassurance and is more about holding on to stable growth than a sprint to the finish. The weakest overall activity in six months shows that caution and Brexit concern remain roadblocks to strong growth."