Construction output rebounds in 2015

markitJanuary data has pointed to a positive start to 2015, with the latest construction PMI from Markit and the Chartered Institute of Purchasing and Supply (CIPS) showing a recovery from the low levels of output recorded in December 2014.

At 59.1 in January – up from December’s 57.6 – the PMI pointed to a strong rebound from the reduced activity seen at the end of 2014. However, the latest data shows a significant reduction from January 2014, when the construction PMI was recorded at 64.6.

The index has registered above the neutral 50.0 threshold for 21 months running, although the latest reading was still the second-lowest seen since September 2013. As a result, the latest survey indicated that overall growth momentum rebounded since December, but was much weaker than the average for 2014 as a whole (61.8).

David Noble, group chief executive officer at CIPS, said:

“After the disappointing end to last year and the drop in the industry’s fortunes, the construction sector has had a perky start with good activity across all sectors.

“Though the month’s activity was well below the highs of the peak recovery months, the modest increase in growth may beat away any wider concerns around an unsustained improvement in the sector’s fortunes.”

All three broad areas of construction activity have picked up since December, but in each case the rate of expansion was weaker than the peaks seen in 2014. Residential building remained the best performing sub-category in January, with the latest survey marking two years of continuous expansion. Meanwhile, a robust rise in commercial construction and a rebound in civil engineering activity were also recorded following decline in December.

Tim Moore, senior economist at Markit and author of the Construction PMI, said:

“UK construction companies have found their feet again after a protracted slowdown in output growth at the end of 2014. Stronger trends were recorded across housing, commercial and civil engineering, although each category of activity still experienced much slower growth than the high-water marks achieved last year.

“In short, the peak speed of the construction recovery seems to be over, but reports of its death have been greatly exaggerated.”

While volumes of new work have increased at ?robust’ levels, the rate of job creation has reached its weakest rate since December 2013. Respondents to the Construction PMI have suggested that softer new business gains in recent months had contributed to a slowdown in employment growth at their units.

Supply chain pressures have also persisted, leading to a further deterioration in vendor performance, while the availability of sub-contractors also decreased sharply during January.

Despite the improved performance of construction in January 2015, new data from the Office of National Statistics (ONS) has suggested that the industry as a whole is in a state of decline after a decrease of 1.8% was recorded in construction during the final quarter of 2014.

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