Construction sector bounces back with strong growth in new orders

Construction Building 480

Recovery in the construction industry continued in June, with the sector seeing the strongest growth rate for seven months.

The Construction Purchasing Managers’ Index showed that new orders among construction firms was also buoyant, rising at the fastest pace since May 2017.

This closely-watched index, compiled by IHS Markit showed activity in the sector rose to a balance of 53.1 in June, up from 52.5 the month before.

This is the third month in the row that the sector has shown growth – represented by a figure over 50.

Markit says this increase was driven by growth in both the residential and commercial property sectors. 

The  number of new hires in the industry is also rising at the fastest pace for a year. Business expectations also rose, but still remains below the level recorded a year ago. 

These figures contrast sharply with activity levels at the start of the year, where the bad weather in February and March was blamed for a serious slump in output. 

But Markit adds that the downside of this increase in output was a longer lead time for getting supplies, and the sharpest increase in input prices since September.  

The Chartered Institute of Procurement and Supply group director Duncan Brook says: “Despite being hampered by economic uncertainty, firms reported an improved pipeline of work as clients committed to projects, and hesitancy was swept away.”

Surveyors Naismiths managing director Blane Perrotton adds: “These figures are flattered by comparison to the weak data recorded at the start of 2018. But such solid improvements in both output and new orders reveal some genuine momentum.”

He adds: “In part this is the release of pent-up demand. While optimism is strongest outside London – with the North West, West Midlands and Bristol markets all buoyant – even the capital is starting to see a creeping improvement in sentiment.”

But Perrotton warned that that with the Brexit clock counting down there was “considerable scope” for volatility in this sector in the months ahead.

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