June construction data boosts optimism

Published:  05 July, 2013

UK construction companies have indicated a further moderate rise in business activity during June. This was highlighted by the latest reading of the seasonally adjusted Markit/CIPS UK Construction Purchasing Managers' Index, which was the strongest since May 2012.

Highlights of the latest reading include:

Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, said: “June’s construction data is one of the final pieces in the puzzle when it comes to survey evidence for second-quarter UK economic performance, and the sector’s upturn adds to the upbeat news flow ahead of Mark Carney’s first policy meeting at the Bank of England this week.

“The improvement in overall construction output simultaneously raises chances of strong second-quarter UK GDP growth, and reduces the likelihood of imminent additional policy stimulus from the Bank of England.”

According to Moore, government incentive schemes have bolstered the housebuilding sector, the main area of growth for the industry. He added, on an optimistic note, that it was encouraging to see some stability back in civil engineering and commercial building after such a lengthy period of decline.

Commenting on the report, David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said: “A new dawn is emerging in the construction industry, with confidence of a sustained recovery beginning to build thanks to two months of consecutive output growth and the pace of new orders expansion hitting a 13-month high. Housing is the leading light sustaining last month’s performance; meanwhile commercial and civil engineering activity stabilised, arresting months of decline giving further cause for optimism.

“The strongest growth in new business orders for over a year is also driving employment upwards, resulting in confidence hitting its highest level since April 2012. This enthusiasm may also have been bolstered by the government’s support for new housebuilding. Whether expectations match reality, only time will tell.

“Suppliers still bear the scars of the recession, reflected in a lack of stock and limited capacity. Coupled with higher average-cost burdens, this is placing pressure on supply chains and cost margins. This needs to be rectified if the sector is to build on this momentum.”

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