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Fastest rise in construction output for eight months

TAI

Growth led by marked rise in housing activity but business confidence softest since January 2021

FEBRUARY Purchasing Managers’ Index (PMI) data indicated that business activity gained momentum across the UK construction sector last month. Building companies commented on the strongest rise in output since mid-2021 amid stronger client confidence and work on new projects commencing.

The headline seasonally adjusted IHS Markit/CIPS UK Construction PMI Total Activity Index registered 59.1 in February, up from 56.3 in January, signalling a robust and accelerated rise in output volumes. The headline index has now posted above the neutral 50.0 threshold in each of the last 13 months.

House building (index at 61.5) replaced commercial work (58.4) as the best performing category of construction work in February. The latest increase in residential work was the strongest for eight months. Commercial construction also expanded at a quicker pace than in January, with the rate of growth the sharpest since last July. Meanwhile, civil engineering activity (index at 57.5) increased at an accelerated pace that was the strongest since June 2021.

New order growth accelerated for the fourth month running in the latest survey period to extend the current sequence of expansion to 21 months. Moreover, the rate of growth was the fastest since last August as construction companies commented on stronger client demand in line with the recovery in economic activity and new projects being brought to tender.

The near-term outlook for construction activity remained positive in February, with just under half of the survey panel (48%) forecasting an increase in output during the year ahead, whilst only 9% predicted a fall. That said, the overall degree of optimism eased to the softest since January 2021 as firms cited concerns about the impact of rising costs and supply shortages.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: ‘The construction sector maintained its growth momentum whilst battling a number of headwinds such as supply issues and higher input costs to put in its best performance for eight months in February.

‘All three sectors offered positive news, but housing stormed ahead with the strongest rise in residential building since June last year. The reasons for this improvement ranged from securing contracts in the pipeline of new work and improved deliveries for some materials. That said, hampered supply chains still made business difficult across all sectors and deliveries remained painfully slow.

‘Also, the highest rise in order books for six months didn’t do enough to improve future optimism as business expectations dropped to January 2021 levels. Curbing inflation will continue to be a big issue for building firms who will be nervous about securing continuing supply and offsetting price rises to improve business margins, especially if costs continue their skyward trajectory.’

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