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Post-election bounce for construction

UK construction output growth

Slight rebound in UK construction output growth in May as business confidence rises

UK construction companies recorded a slight rebound in output growth during May, partially reversing the loss of momentum seen in April ahead of the general election, according to the latest Markit/CIPS UK Construction Purchasing Managers’ Index (PMI).

The headline seasonally adjusted index registered 55.9 in May, up from 54.2 in April and well above the neutral 50.0 threshold.

 

Looking ahead, business confidence across the construction sector also picked up sharply over the month, with the degree of positive sentiment the highest since February 2006. According to survey respondents, this was driven by signs of a post-election bounce in clients’ willingness to spend.

Although the upturn in UK construction activity during May was less marked than that seen through much of the past two years, the latest survey marked the first acceleration in output growth since February this year.

The modest rebound was said to be driven by a sharp and accelerated increase in residential building activity, alongside a return to growth in the civil engineering sub-sector.

Moreover, construction companies have indicated a sharp rebound in their outlook for business activity over the next 12 months, with more than half of the survey panel (58%) anticipating a rise in output levels, while only 4% forecast a reduction.

Tim Moore, senior economist at Markit and author of the Markit/CIPS UK Construction PMI, said: ‘May’s survey provides the first sign of a post-election bounce in the UK construction sector. With a sustained period of policy uncertainty no longer on the horizon, business confidence surged back to its highest level since early 2006.’

However, Mr Moore cautioned that it was far from certain whether the relief rally in construction confidence would usher in a lasting turnaround in output volumes on the ground.

‘Despite a client spending rebound in May, all three key areas of construction activity have lost
considerable momentum over the past 12 months,’ he said. ‘The scale of the construction slowdown since 2014 is such that it will not be fully reversed through the release of pent-up demand after the election alone.’

 

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