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Construction rises as temperatures soar

The latest IHS Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI®) has been released for June, showing construction output is rising as the temperatures soar.

Construction is basking in early summer sun, with figures hitting a seven-month high in June. Solid expansion across the board has been underpinned by rises in residential work and upturns in commercial work.

House building remains best performing area of activity, with the government push to tackle the housing crisis, while new orders have shown the strongest rise since May 2017. Many within the industry are hopeful that this is a sign of positive future growth as the up-turn is the strongest for the last year. This is supported by the largest upturn in input buying for two-and-a-half years.

However, cost concerns are still; on many firms’ minds, with the improved demand for construction materials resulting in longer lead times from suppliers and the most marked increase in input prices since September 2017.

The June PMI® figure is posted at 53.1 for June, up from 52.5 in May and solidly above the 50.0 no-change value for the third month running.

The latest reading shows the sharpest overall rise in construction output since November 2017.

The return to growth is led by commercial building, which had the strongest overall rise in construction output, expanding at the fastest pace since February. At the other end of the scale, civil engineering activity rose only slightly in June, with the rate of growth easing to a three-month low. However, respondents still cited infrastructure work as a key source of growth in the coming 12 months.

Purchase Managers responding to the survey said that an improving client book had boosted workloads, and new orders numbers reversed the decline noted in May.

The latest rise in input buying was the steepest since December 2015, respondents noted that companies may well have been buying for future projects to negate any further cost rises. Input prices also rose for the industry, at the steepest rise for nine months. Respondents attributed this to greater transportation costs and higher prices for metals (especially steel).

With promising figure to hand, the latest survey also indicated rebound in business optimism from May’s seven-month low, although the degree of positive sentiment remained much weaker than the long-run survey average.

Tim Moore, Associate Director at IHS Markit and author of the IHS Markit/CIPS Construction PMI®, commented: “The latest increase in UK construction output marks three months of sustained recovery from the snow-related disruption seen back in March. A solid contribution from house building helped to drive up overall construction activity in June, while a lack of new work to replace completed civil engineering projects continued to hold back growth.

“Of the three main categories of construction work, commercial building was sandwiched in the middle of the performance table during June. Survey respondents suggested that improved opportunities for industrial and distribution work were the main bright spots, which helped to offset some of the slowdown in retail and office development.

“Stretched supply chains and stronger input buying resulted in longer delivery times for construction materials during June. At the same time, higher transportation costs and rising prices for steel related inputs led to the fastest increase in cost burdens across the construction sector since September 2017.”

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