September figures from Markit/CIPS’ PMI have highlighted a rise in activity across the construction sector for the first time since May, with a recovery in residential building playing a key role.
Adjusted for seasonal influences, the Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) registered 52.3 in September, up from 49.2 in August and above the 50.0 no-change value for the first time in four months.
A solid rebound in residential activity was reportedly the key factor boosting overall construction output during September. Moreover, the latest increase in housing activity was the strongest recorded since January.
A number of firms cited resilient demand for residential building work and generally improving market conditions, while generally survey respondents cited improving confidence among clients and a reduced drag on demand from Brexit-related uncertainty.
Reflecting this, construction firms indicated a further recovery in their business expectations for the next 12 months, with optimism the strongest since May. Just under half of the survey panel (45%) forecast a rise in output over the year ahead, while only 9% anticipate a reduction.
Commercial construction activity decreased for the fourth month running, which is the longest period of sustained decline since early-2013. However, the latest fall was only modest and the slowest recorded since the downturn began in June. Higher levels of overall construction activity were supported by a rise in new work for the first time since April.
There were again widespread reports that exchange rate depreciation had pushed up the cost of construction materials during September. A number of survey respondents noted that domestic suppliers had sought to pass on higher imported raw material costs. Although easing since August, the rate of input price inflation was close to the highest for two years.
Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI, said: “UK construction companies moved back into expansion mode during September, led by a swift recovery in residential building from the three-and a-half year low recorded in June.
“Resilient housing market conditions and a renewed upturn in civil engineering activity helped to drive an overall improvement in construction output volumes for the first time since the EU referendum.
“But, the sector still faces challenges with continuing pressures on input prices resulting from the weaker pound and the lingering uncertainty of the Brexit process and how it will impact on future business.”
