Construction recovery 'remains on track'

The recovery across the construction industry “remains on track” with firms reporting rising demand in January and an increase in employment numbers, the latest Markit/CIPS survey has found

The monthly survey of purchasing managers, which measures how widespread rises or falls in activity across the industry are, recorded a value of 64.6 in January, up from 62.1 in December.

The index, prepared by CIPS and Markit, records growth as any figure above 50, with figures below 50 indicating a decline in activity.

This is now the ninth month in a row that activity has risen.

The survey comes after the latest Office for National Statistics construction output figures showed that the recovery across the industry stalled in the final quarter of 2013, with output contracting by 0.3% quarter-on-quarter, the only sector in the economy to contract.

However, the Markit/CIPS survey for January (attached right) found rising activity across all three broad areas of construction monitored by the survey, with residential construction remaining the best performing sector, with the latest expansion of housing activity the steepest since November 2003.

Meanwhile, commercial building work and civil engineering activity both increased sharply during January, and in each case the latest expansion was the steepest since the summer of 2007.

The survey also found the latest overall rise in new orders was the fastest since August 2007, with anecdotal evidence from survey respondents suggesting that an ongoing upturn in domestic economic conditions, alongside greater access to finance among clients had boosted new business volumes at the start of the year.

The survey also found that confidence about the year-ahead was the most positive since September 2009, which supported an increase in job hiring in January. The survey said higher levels of employment have now been recorded in the construction sector for eight consecutive months, which is the longest continuous period of job creation since early 2008.

Tim Moore, senior economist at Markit, said: “January’s survey provides reassurance that the UK construction recovery remains on track.

“The latest data show positive developments on a number of fronts, with job creation rebounding at the start of the year while output and new business growth was the fastest since the summer of 2007.

“Housing activity growth now stands at its strongest for just over a decade, boosted by growing demand for new homes and improving confidence within the UK property market.

“Meanwhile, strengthening domestic economic conditions spurred greater spending on commercial projects in January.

“A sharp rise in civil engineering activity completed an impressive showing from all three sub-categories of construction monitored by the survey.

“While input cost inflation eased in January, there were again signs that some suppliers are struggling to adjust to greater demand for construction materials.

“Vendor lead-times were lengthening even before the surge in construction output began last year, and now firms are reporting that cutbacks to capacity have caused supply bottlenecks as demand picks up across the sector.”