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New Year optimism as construction starts on a high

January 7th, 2014

Call to end Building Site DeathsUK construction companies remained in growth mode at the end of 2013, with output, new orders and jobs all on the increase, the latest monthly survey of purchasing managers shows.

Further growth is also widely anticipated for 2014.

The seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) showed a score of 62.1 for December, down only marginally on November’s 62.6 score – a 75-month high – and continuing well above the 50.0 no-change level.

The December reading marked eight months of continuous output growth in the UK construction sector.

Higher levels of business activity reflected strong rates of expansion in all three broad categories of construction output monitored by the survey: house-building, commercial construction and civil engineering.

Residential activity remained the fastest growing area of construction, but it was also the only category to post a slower pace of expansion than in November. Meanwhile, work on commercial projects rose at the steepest rate since August 2007 and civil engineering activity increased at the same pace as that reported in the previous month.

Construction’s purchasing managers noted that improving business conditions and greater confidence in the economic outlook had boosted spending among clients during December. Higher levels of incoming new work have now been recorded in each of the past eight months. Although the rate of new order growth eased since November, the latest expansion was one of the steepest seen since late 2007. And the proportion of companies expecting an increase in output levels (57%) is much higher than was recorded just before the start of 2013 (31%).

Stronger business confidence and a sustained improvement in new order levels continued to drive staff recruitment in the construction sector during December. Increased workforce numbers have now been recorded for seven consecutive months, which is the longest continuous period of job creation for around five-and-a-half years. Construction companies also pointed to the fastest rise in subcontractor usage since April 2004.

Meanwhile, suppliers’ delivery times lengthened sharply at the end of 2013, as increased purchasing volumes placed pressure on stock availability. Strong demand for inputs contributed to a further rise in cost burdens in December. Latest data indicated that the rate of input price inflation was little-changed since November, and remained at a level rarely exceeded during the past two-and-a-half years.

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