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CIPS figures show output falling

The UK construction industry continued to grow in August, according to the latest Markit/CIPS Construction Purchasing Managers’ Index.

However, the latest figure of 52.6 was down from July’s 53.5 and the lowest of the current eight-month sequence of expansion.

An improved performance from the commercial industry was outweighed by a weaker rise in civil engineering work. Housing, meanwhile, continued to contract, although at a slower pace than in July.

However, new work flowing in was the least marked since January.

Weaker increases in both output and new business were reflected in expectations for activity in August. Confidence was at its lowest for eight months and well below the series trend. Nevertheless, over 34% of UK constructors anticipate growth in the next year, commenting on forecasts for stronger demand, company expansions and advertising campaigns.

Both employment levels and sub-contractor usage continued to fall during the latest survey period, which respondents linked to either lower workloads or expectations of weaker market demand.

Purchasing activity rose at a milder pace during August, in line with a weaker trend in new order growth. The latest increase was only moderate and slower than the average for the current eight-month run of expansion.

Higher demand for inputs, alongside low stock holdings and insufficient capacity at suppliers, resulted in further delivery delays in August. UK constructors have now reported worsening vendor performance during every month for a year.

Input price inflation picked up to a three-month high in August. The rate of increase was sharp and above the series trend. Respondents attributed higher input costs to increased prices for fuel and raw materials.

David Noble, CEO at the Chartered Institute of Purchasing & Supply, said: “Reality is continuing to bite in the UK construction sector, as worries over wider economic conditions contribute to a slower rate of output growth.

“Although over a third of panellists anticipate growth of activity in the coming year, the overall level of positive sentiment remains far below that seen at the start of the recovery.

“Lukewarm order books have contributed to sharper declines in staffing levels. However, the proof of the pudding will be whether the reported increase in competition for new orders, plus increases in fuel and commodity prices, will subdue confidence going forward.

“The housing sector also continues to be a worry, with a fall in the number of residential projects adding to an already sluggish picture for the sector. Though overall activity is still in growth territory, there may be some question about whether this will continue for much longer.”

About Fiona Russell-Horne

Fiona Russell-Horne
Group Managing Editor across the BMJ portfolio.

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