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Markit/CIPS UK Construction PMI data shows robust job creation

Business activity has slowed down but encouragement recorded despite General Election uncertainty.

The latest Markit/CIPS UK Construction PMI survey data was released this morning, and although business activity growth dropped for the second consecutive month, the index is still above the 50.0 value that indicates no change, meaning there is a solid overall pace of expansion.

In addition, April showed that job creation within the industry has stayed robust and residential building activity performed well in that month.

While there was a fall in civil engineering activity, it was the first time for four months this has happened, while commercial construction work saw its smallest growth since August 2013.

At 54.2, the PMI is down from 57.8 in March – the lowest level in almost two years.

Even though the rate of staff hiring is less than the average seen in 2014, robust job creation was maintained last month, with increased workforce numbers linked to rising business investment and efforts to boost operating capacity.

The use of subcontractors dropped slightly but there wasn’t a marked difference in the availability of subcontractors. Prices for their work have increased at the fastest rate since the survey began.

One of the most significant responses from the survey suggests that the fact that the result of the Election is on such a knife edge is creating uncertainty which is in turn contributing to delays in the spending decisions of clients.

It is something that was highlighted by Joshua Raymond at City Index, who believes that market confidence will be impacted by the outcome.

“The sharp slowdown in construction PMI matches a similar slowdown in manufacturing PMI’s for the same reporting period and hints towards some softness in UK GDP for the start of the quarter.

“Clearly there is a degree of hesitation here on the uncertainty around the UK General Election where construction is likely to be a highly sensitive area given the UK’s well known housing shortage.

“Nevertheless, all market sensitivity this week will be on the General Election and whether the Conservatives or Labour find a suitable coalition or decide to go it alone as a minority government, which could have a bigger impact on market confidence in the near term.”

David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, echoed these thoughts, adding: “The General Election has given the sector pause for thought as procurement and supply management professionals reported a slowdown in the pace of new construction orders growth.

“Though the index still remains in positive terrain, the deceleration has been attributed to project delays and hesitancy as the country prepares to vote.

“Subcontractors continue to be the winners in ongoing work, being in short supply and demanding higher rates for their labour – rising at the swiftest pace for almost 20 years.

“However, the sector continued to gear up and increase in-house staffing levels to meet the needs of higher levels of investment and to increase capacity and capability levels in supply chains.

“With this slack in new pipeline orders, suppliers were able to improve their performance as well as increase levels of stock to lighten any log jam in the supply of raw materials.

“Though new business growth in the sector has slowed for eight months out of the last ten, business optimism is only slightly bruised and remains more solid than the average over the life of the index.”