The latest PMI data has found that business activity in the UK construction sector increased for the twelfth consecutive month in January.
This is shown by the headline seasonally adjusted IHS Markit/CIPS UK Construction PMI Total Activity Index, which registered above the crucial 50.0 no change mark for the twelfth month in a row, with 56.3 in January, up from 54.3 in December. Moreover, the latest reading signalled the strongest rate of output expansion since July 2021.
January data also illustrated a robust and accelerated rise in new work received by construction companies. The rate of growth was the fastest since August 2021, which survey respondents often attributed to rising confidence among clients. Furthermore, strong pipelines of new work encouraged additional staff hiring in January, creating the best month for job creation since last October.
Input buying picked up at the start of 2022, reflecting new project starts and stock building efforts. Despite another rise in demand for construction products and materials, the latest survey pointed to a turnaround in supply pressures. Construction firms recorded the least widespread delays for almost one-and-a-half years.
Breaking down categories
Commercial work was by far the best-performing category (57.6), with growth accelerating to a six-month high amid a boost to client demand from recovering UK economic conditions. Survey respondents often noted that optimism about the roll back of pandemic restrictions had led to greater spending on commercial construction projects.
Civil engineering returned to growth in January (53.2), although the rebound was softer than seen in other parts of the construction sector. House building activity meanwhile increased at the slowest pace for four months (54.3).
Supply chain issues ending
Rapid rises in raw material prices, energy costs and transportation bills continued push up business expenses in the construction sector. The overall rate of inflation nonetheless eased to its lowest for 10 months in January.
However, supplier lead times continued to lengthen in January as staff shortages and a lack of haulage availability hindered deliveries. Nevertheless, the peak phase of supply chain difficulties appears to have passed as evident from the latest downturn in vendor performance was the smallest since September 2020.
Outlook
Finally, the latest survey indicated that construction companies remained highly upbeat about the business outlook. More than half of the survey panel (53%) forecast a rise in output during the year ahead, while only 5% predict a decline. Optimism was the strongest since May 2021 and largely reflected increasing tender opportunities and expectations of a swift recovery for the UK economy in 2022.
