UK construction PMI data shows the fastest output rise in eight months

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uk construction pmi
©Panchita Chotthanawarapong

UK construction PMI data from February indicated that business momentum has increased, with building companies showing the strongest rise in output since mid-2021

UK construction PMI data also showed that companies were experiencing widespread supply constraints and rapidly increasing input costs, however the rate of inflation is slowly decreasing.

Despite this, ongoing disruption dampened the year-ahead outlook for activity, with confidence at the lowest since January 2021.

The headline seasonally adjusted IHS Markit/CIPS UK Construction PMI Total Activity Index registered 59.1 in February, up from 56.3 in January to signal a robust and accelerated rise in output volumes. The headline index has now posted above the neutral 50.0 threshold in each of the last 13 months.

Housebuilding is the best performing category

House building replaced commercial work as the best performing category of construction work in February, with the latest increase in residential work being the strongest for eight months.

Commercial construction also expanded at a quicker pace than in January, with the rate of growth the sharpest since last July.

Meanwhile, civil engineering activity increased the strongest since June 2021. Furthermore, new order growth accelerated for the fourth month running in the latest survey period to extend the current sequence of expansion to 21 months. Moreover, the rate of growth was the fastest since last August as construction companies commented on stronger client demand in line with a recovery in economic activity and new projects being brought to tender.

The rise in new work were highlighted by a steep rise in input buying across the construction sector during February, with the latest expansion at its highest for seven months and commonly reflected pre-purchasing ahead of new project starts.

Driver and materials shortages are the main cause of delays

Around 36% of the survey panel reported longer delivery times among suppliers in February, while only 4% saw an improvement. Delays were linked to driver and material shortages, as well as international shipping delays.

Reflective of widespread delivery delays, the latest UK construction PMI data signalled another rapid rise in input prices, though the rate of inflation eased to an 11-month low. The increase in purchase prices was often attributed to rising raw material and commodity prices amid supply shortages, alongside a lack of transport capacity.

‘The fastest rise in residential work for eight months’

Usamah Bhatti, economist at IHS Markit said: “UK construction companies achieved a faster expansion in output volumes in February as the economy recovered from the recent wave of COVID-19 infections related to the Omicron variant. House building had the strongest showing, as signalled by the fastest rise in residential work for eight months.

“Despite continued volatility in price and supply conditions, the overall rate of new order growth accelerated from January to reach the fastest since last August as client confidence improved in line with economic activity as Plan B restrictions were fully lifted.

“Nonetheless, widespread reports of shortages of materials and labour continued to plague the UK construction sector, while rising input costs placed further strain on businesses. It appears that the peak of price pressures has passed as the rate of input cost inflation eased for the sixth month in a row to reach the softest since last March.

“At the same time, reports of supplier delays were considerably lower than those seen in the middle of last year. Yet, price and supply constraints weighed on overall business confidence, which eased to the softest in just over a year.”

Pressures continue to ease on the construction industry

Stephen Marcos Jones, chief executive of ACE, commented: “More good news for construction and the continued easing of pressures on the sector is welcomed. With demand upbeat as we emerge from the latest coronavirus wave, and pressures on supply chains easing, there is plenty to be positive about.

“Having said that, companies will be keeping an eye on the supply and availability of materials and skills, crucial if we are to be able to meet this uptick in demand. ACE members welcome this positive news and the confidence it creates for the wider construction sector.”

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