Survey reports sharp rise in construction activity

Construction sector output growth rebounded at fastest rate for four months during June

A FURTHER rebound in construction sector output growth from the 22-month low recorded in April was highlighted by a rise in the headline seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) from 55.9 in May to 58.1 in June.

The latest reading was well above the long-run survey average (54.6) and pointed to the fastest increase in overall construction activity since February.

Residential activity remained the fastest growing area of construction output in June, although the acceleration in the headline index since May was also driven by a sharp upturn in both commercial and civil engineering activity growth over the month.

Reports from survey respondents suggested that improving client demand and strong order books continued to support output growth in June. Highlighting this, latest data indicated that overall growth of new work rebounded for the second successive month to its steepest since October 2014.

Looking ahead, just under two-thirds of the survey panel (62%) forecast a rise in output over the next 12 months, while only 4% expect a decline. As a result, the latest survey pointed to the strongest degree of business optimism across the UK construction sector since February 2004.

Companies that anticipate a rise in business activity over the year ahead generally cited increased investment spending among clients and robust demand for new residential projects. Moreover, survey respondents noted an increase in new invitations to tender across a range of commercial projects, alongside hopes of new business gains from forthcoming major infrastructure projects.

Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, said: ‘UK construction companies experienced a growth rebound and surge in business confidence at the end of the second quarter. Survey respondents cited robust inflows of new work in June, adding to already strong order books across the sector.

‘The extent of the recent rise in construction optimism is partly down to relief that pre-election uncertainty has now passed, but it also suggests that firms are infused with confidence that underlying demand will continue to recover.’