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A 24-year-high in construction output growth

The bellwether IHS Markit/CIPS UK Construction PMI Total Activity Index hit 66.3 in June, up from 64.2 in May. This presenting the strongest rate of growth for 24 years (since 1997).

Key findings included: a rapid rise in new business volumes during May, output growth accelerated to its strongest since September 2014, and cost inflation hit a fresh survey-record high.

The May PMI data indicated that the UK construction sector was remaining strong on the path to recovery as output reached its strongest level since September 2014.

The latest survey pointed to a rapid upturn in new business across the construction sector. Around 47% of the survey panel reported higher volumes of new work, while only 11% displayed a reduction.

In addition, new order volumes increased at the fastest pace since the survey began. But on the other hand, input cost inflation was also at a survey-record high during May, and this could be reflective of the surge in demand for construction materials and severe supply shortages.

New project starts and a sustained recovery in construction workloads resulted in another marked rise in staffing numbers during May with the rate of job creation was the fastest since July 2014.

Suppliers’ delivery times lengthened sharply in May, with the downturn in vendor performance being the second-steepest since the survey began (exceeded only by that seen in April 2020).

Stretched supply chains and steep rises in raw material prices contributed to a rapid increase in average cost burdens. The overall rate of input price inflation was the highest in just over 24 years of data collection.

Tim Moore, economics director at IHS Markit, said: “UK construction companies reported another month of rapid output growth amid a surge in residential work and the fastest rise in commercial building since August 2007. Total new orders increased at the strongest rate since the survey began more than two decades ago, but supply chains once again struggled to keep pace with the rebound in demand.

“There were widespread reports citing shortages of construction materials and wait times from suppliers lengthened considerably in comparison to those seen during April. Imbalanced supply and demand led to survey record increases in both purchasing prices and rates charged by sub-contractors.”

Despite severe challenges with materials availability, construction firms remain highly upbeat about their near-term growth prospects. Nearly two-thirds of the survey panel forecast an increase in output during the year ahead, while only one-in-thirteen forecast a decline.”

According to IHS Markit, construction companies are feeling positive about their growth prospects for the next 12 months. Around 61% of the survey panel have predicted a rise in business activity, while just 8% are anticipating a decline. The positivity was mostly attributed to the increase in customer demand, alongside optimism about the UK economic outlook after the success of the vaccine roll out.


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