Construction output rebounds in May

UK construction companies recorded a slight rebound in output growth during May following a near two-year low recorded in April, according to a survey.
The headline seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI®) registered 55.9 in May, up from 54.2 in April and well above the neutral 50.0 threshold. However, the latest reading was still the second-lowest since June 2013.

According to survey respondents, the rebound in growth was driven by post-election bounce in clients’ willingness to spend, which in turn supported a further sharp upturn in employment levels.

Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI®, said:

“May’s survey provides the first sign of a post-election bounce in the UK construction sector. With a sustained period of policy uncertainty no longer on the horizon, business confidence surged back to its highest level since early-2006.

“Additionally, construction firms experienced an upturn in new business growth from April’s near two-year low and job creation was the fastest recorded so far in 2015.

“However, it is far from certain whether the relief rally in construction confidence will usher in a lasting turnaround in output volumes on the ground.

“Despite a client spending rebound in May, all three key areas of construction activity have lost considerable momentum over the past 12 months. The scale of the construction slowdown since 2014 is such that it will not be fully reversed through the release of pent up demand after the election alone.

“Moreover, substantial supply chain pressures and acute sub-contractor shortages persisted during May, especially across the UK house building sector, in turn driving up operating costs and hampering productivity gains at construction firms.”