Business confidence within the construction sector reached an 11-year high in June as General Election uncertainty gave way to growing order books, according to the latest report from Markit and the Chartered Institute of Purchasing & Supply (CIPS).
The closely watched industry survey found that the industry has continued to rebound from April 2015’s low point, reaching a headline Purchasing Managers’ Index (PMI) of 58.1, up from May’s 55.9. This is well above the survey average (54.6) and marks the fastest increase in overall construction activity since February.
While residential activity continued to fuel growth, a sharp upturn in both commercial and civil engineering activity sparked the acceleration in June’s PMI.
David Noble, group chief executive officer at CIPS, said: “Construction was on a real high this month with the sharpest rise in overall activity since February as the sector made up for lost ground since the General Election.
“Client expectations and strong order books were the recipe for success along with support from a resilient economic environment encouraging positive sentiment in the sector and resulting in accelerated and hastened purchasing activity.”
This performance has led to a huge increase in business confidence for the next 12 months, with 62% of respondents forecasting a rise in output, while only 4% expect a decline. As a result, June’s survey points to the strongest degree of business optimism since February 2004. Companies that anticipate a rise in activity cited increased investment spending among clients and robust demand for new residential projects, with an increase in new invitations to tender for commercial projects and hopes of new infrastructure business was also a contributor.
The level of growth recorded in June also led to the fastest increase in employment numbers within the construction industry since December 2014.
However, increasing levels of demand have continued to add to supplier pressures. Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, said: “Scorching hot demand for some construction products placed additional pressure on supply chains in June, with delivery times lengthening again for a wide range of materials. Meanwhile, another substantial rise in sub-contractor charges highlighted that persistent skill shortages in the construction sector are contributing to sharp rises in labour costs in some areas.”
