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Construction output rises at fastest pace since August 2007

November showed a further strong increase in construction industry output, according to figures from the Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI®)
Both output and employment rose during November at their sharpest rate since August 2007. Growth of business activity was broad based across the three main areas of construction, with residential building again the best performing category. Higher levels of output were supported by the joint-fastest expansion of incoming new work since September 2007.

The PMI registered 62.6 in November, up sharply from 59.4 in October and above the 50.0 no-change mark for the seventh successive month. The latest reading was well above the long-run series average (54.1) and indicated the steepest expansion of overall business activity for just over six years.

Construction companies pointed to a steep and accelerated expansion of house building activity in November, with the rate of growth the fastest for ten years. Work on commercial construction projects also increased sharply during the latest survey period, and the rate of expansion was the steepest since September 2007. Civil engineering activity increased at a robust pace that was little-changed from that recorded in October.

Anecdotal evidence from survey respondents widely pointed to more favourable business conditions in November, with rising confidence in the economic outlook and improving credit conditions helping to boost spending across the construction sector. As a result, volumes of new work increased at a strong and accelerated pace, with the latest rise in new orders the joint-sharpest for just over six years.

Moreover, construction companies pointed to greater optimism regarding the year-ahead business outlook. The balance of firms anticipating a rise in output was the highest since September 2009, reflecting widespread expectations that the overall business climate will continue to improve during the 12 months ahead.

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said: “House building lived up to its new-found status as star performer in November with the steepest growth rates in 10 years, with commercial and civil engineering activity holding their ground too. Inevitably, business confidence continued to rise sharply, helping to boost spending across the industry heading into the festive season.

“Supported by favourable market conditions, new orders increased at the joint-fastest pace since September 2007. This in turn contributed to a significant increase in workforce numbers, pointing to continued optimism and rising expectations for the future.

“As seen in previous months, suppliers are struggling to keep up with the sharp surge in demand; stocks are being squeezed and delivery times continue to lengthen, to the greatest degree since 1997. Along with increasing cost burdens, there are worries that this will have an impact on output; despite this construction firms are confident this won’t hold them back in the New Year.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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