November data indicated that the UK construction sector continued to rebound from the ‘weak patch’ recorded on average during the third quarter of 2016.
Business activity and incoming new work increased at the strongest pace since March, although both rates of expansion remained much softer than the peaks achieved at the start of 2014. Greater workloads underpinned a further solid rise in employment levels and input buying among construction firms. However, average cost burdens rose sharply, with the rate of inflation the steepest since April 2011.
The seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) picked up slightly to 52.8 in November, from 52.6 in October, thereby signalling an expansion of total business activity for the third month running.
Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI, said: “UK construction companies experienced a steady recovery in business activity during November, which continues the rebound from the downturn seen over the third quarter of 2016. The brighter picture reflected another solid contribution from residential building and renewed growth in commercial work, which some companies linked to a resumption of projects that had been delayed after the Brexit vote.
“November’s survey data revealed the strongest rise in overall new business volumes since March. However, lingering economic uncertainty and subdued investor sentiment meant that optimism towards the year-ahead outlook remained close to its lowest since early-2013.
“Input cost inflation accelerated to its fastest for five-and-a-half years, driven by sharply rising imported raw material prices. A number of firms cited uncertainty related to supplier price hikes as an emerging threat to the construction sector, with survey respondents commenting on difficulties forecasting project costs against a backdrop of rapidly changing inflationary pressures.”
