Sharp rebound in construction growth
Residential house building activity drives construction growth to 17-month high in May
UK construction companies experienced a sharp rebound in business activity during May 2017, helped by the fastest upturn in residential work since the end of 2015, according to the latest IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI).
The survey also revealed a sustained recovery in new work, following the soft patch seen during the first quarter of 2017.
The seasonally adjusted Construction PMI posted 56.0 in May, up sharply from 53.1 in April, to signal the strongest expansion of overall business activity for 17 months.
However, while the headline index signalled robust growth momentum during May, the latest reading was still much weaker than the post-crisis peak seen in January 2014 (64.6).
A sharp and accelerated rise in residential work was a key factor supporting overall construction activity in May, with the housing sub-category having rebounded strongly following the seven-month low seen in March.
Moreover, the latest increase in residential building was the fastest since December 2015. Survey respondents cited a strong pipeline of new development projects and resilient underlying demand conditions.
May data also pointed to solid rises in civil engineering and commercial building. And although commercial development remained the weakest performing sub-category, the latest rise in activity was the fastest since March 2016.
New business intakes picked up in May, with the rate of expansion the fastest seen so far in 2017. Reports from survey respondents mainly cited resilient demand from the housing sector.
Nevertheless, despite the improvement in new work, construction firms noted that heightened economic uncertainty continued to act as a brake on client spending.
A rebound in demand for construction materials also placed pressure on supply chains in May, with delivery times lengthening to the greatest extent since March 2015.
‘May’s survey data reveal that the UK construction sector has started to recover strongly from its slow start to 2017,’ said Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI. ‘House building was the key growth driver, with work on residential projects rising at the fastest pace since December 2015.’
He added: ‘The forward-looking elements of this latest survey are reassuring for the construction sector, notably the acceleration in new business growth to its strongest so far this year.’
