Construction industry sees slight growth in February but costs continue to soar

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Construction industry sees slight growth in February but costs continue to soar
Construction growth was offset by a slowdown in new orders and rapidly rising costs

February gives a mixed picture for the construction industry with growth offset by a slowdown in new orders and rapidly rising costs

The Markit/CIPS Construction Purchasing Managers’ Index (PMI) has revealed a small amount of growth was seen in the construction industry during February. According to the figures the reading moved from 52.2 to 52.5; anything over 50 indicates growth.

While the figure is better than expected—a Reuters poll had estimated an unchanged reading—there are still indications there are difficulties in some parts of the construction industry. This included new orders and the cost of materials.

The index revealed the brakes were put on housebuilding in February, cooling to a six-month low. Furthermore, for the first time in four months commercial construction contracted.

Civil engineering was the only sector to see growth, and it is this that picked up the slack from other parts of the industry.

Soaring costs

The growing cost of materials is an issue that has been highlighted since the summer of last year. Reuters said the UK’s largest supplier of building materials Travis Perkins had reported a 67 per cent fall in pre-tax profits due to the decline of the pound following the Brexit vote.

Chief executive John Carter said: “The sharp decline in the value of sterling since June 2016 has created cost pressures on imported goods and materials, and the expectations for secondary housing market transactions and growth in the repair, maintenance and improvement market have weakened.”

New orders

The index revealed there was hesitancy around new orders during February, with this side of the construction industry increasing at the slowest pace in four months.

Additionally, confidence and optimism declined among construction firms after hitting a 13-month peak in January.

Speaking to Reuters, economist at Pantheon Macroeconomics Samuel Tombs said: “With Brexit uncertainty likely to continue to weigh on business confidence and falling real wages set to worsen housing affordability, it remains hard to see the construction sector’s malaise coming to an end this year.”

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