The UK Construction Purchasing Managers’ Index (PMI) for January has reported the sharpest rise in construction output since August 2007, with strong output growth recorded in all three sub-categories of construction, housing activity increasing at its sharpest pace for over 10 years and a strong rate of job creation being maintained.
The index, jointly maintained by market research experts Markit and the Chartered Institute of Purchasing and Supply, indicated that UK construction companies started the year with an acceleration of output growth at their units, boosted by sharp rises in incoming new work. Stronger demand resulted in a marked increase in employment numbers across the construction sector as well as improved confidence about the business outlook for the next 12 months.
Adjusted for seasonal factors, the PMI registered 64.6 in January, up from 62.1 in December and above the neutral 50.0 value for the ninth successive month.
Output growth at the start of 2014 reflected rising levels of activity across all three broad areas of construction monitored by the survey. Residential construction remained the best performing sub-category, 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.
Confidence about the year-ahead outlook was the most positive since September 2009, which in turn supported job hiring in January. 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. Higher levels of business activity meanwhile boosted input buying across the construction sector in January. The latest expansion of purchasing activity was the steepest since August 2007.
Ironically, stronger demand for construction materials contributed to a further steep deterioration in supplier performance at the start of the year. Longer vendor delivery times have been reported in each month since September 2010, which has been linked by respondents to reduced capacity and low stocks at suppliers.
Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, 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.”
David Noble, chief executive officer at the Chartered Institute of Purchasing and Supply, commented: “The construction industry has started 2014 in formidable fashion, enjoying its strongest growth in six-and-a-half years reinforced by a sharp rise in new business orders. Housing activity growth was the highest in a decade and remains the fastest improving area of construction. This was supported by a solid expansion in civil engineering and commercial activity, confirming a distinctly positive picture across the board.”