Construction output slowed by weak housing activity in July

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The latest survey has revealed the construction sector saw growth slow during July after a four-month high was seen in June…

According to the latest data from the Markit/CIPS UK Construction Purchasing Managers’ Index activity in the construction sector slowed considerably during July. The decline followed a four-month high reported in June and revealed the sector expanded at one of its weakest rates since 2013.

The Markit/CIPS PMI, which is undertaken monthly, showed a decrease from June’s 58.1 to 57.1 in July. Since May 2013, higher levels of construction output have been recorded each month. However, July’s reading was lower than the average seen over this period (59.4).

The data revealed residential building suffered the most, seeing the greatest loss of momentum. During July activity in the civil engineering sector also saw a slower pace of growth. Commercial projects were the only side of the construction sector to see growth, with activity rising at the fastest rate since March.

Additionally, construction companies were the least concerned about vendor performance since May 2012. However, a strong demand for construction materials and low stocks drove up input prices in July, with the overall rate of cost inflation reaching its highest level since March.

In regards to growth prospects over the next 12 months, construction companies remained confident. A total of 55 per cent expected to see an increase in business activity, while only four per cent forecast a reduction.

Senior Economist at Markit and author of the Markit/CIPS Construction PMI Tim Moore said: “July’s growth slowdown is the first for three months and perhaps a sign that the post-election impact on construction confidence has started to diminish.

“Reflecting this, UK construction firms’ business activity expectations moderated from June’s 11-year peak but remain strong overall.

“Commercial activity was a key growth driver during July, which partly offset ongoing weakness in civil engineering and softer residential building trends.

“Sustained growth across the UK economy so far this year has firmed up demand for commercial building work, with construction companies noting a particularly strong appetite for new development projects among clients.

“However, residential activity expanded at one of the slowest rates for over two years, highlighting that the house building sector is struggling to gain momentum despite supportive demand conditions.

“Survey respondents commented on a variety of growth constraints afflicting the residential building sector, including long lead-in times for new projects, scarce supplier capacity, skill shortages and stretched sub-contractor availability.

“Added to this, building costs rose at an accelerated pace in July and sub-contractor charges increased at one of the fastest rates since the survey began in 1997.”

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