Construction output rises but at slowest pace for six months

UK construction companies continued to record strong output rises during April, but the rate of expansion is the weakest since October 2013, according to the latest Markit/CIPS UK Construction Purchasing Managers’ Index (PMI).
The seasonally-adjusted index dipped from 62.5 to 60.8 in April. However, the latest reading is much higher than the 50.0 no-change threshold and well above the long-run survey average (54.3).

Higher levels of construction output have now been recorded for 12 months running. Residential construction was the best performing broad area of activity, and the rate of expansion in April remained one of the fastest seen over the past ten years. Moreover, the current 15-month period of continuous house building growth is the longest since 2006/07.

Commercial activity increased sharply in April, while growth of civil engineering activity eased markedly and was the slowest since September 2013. Some firms noted a moderation in the boost to civil engineering activity from work related to flood relief, according to the PMI survey.

Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, said: “Construction growth has started to moderate from the rapid pace seen over the winter, but strong rises in new work and payroll numbers provide ample optimism that output will expand strongly over the course of 2014.

“Better economic conditions, a surge in house building, improved access to finance and greater investment spending are all important tailwinds for UK construction growth this year. Moreover, the latest survey is another indication that current UK construction trends are healthier than the relatively meagre official growth estimates so far this year.

“April’s survey indicated that residential building was the fastest growing area of UK construction activity, with the latest expansion correlating with at least 45,000 new housing starts per quarter. While there looks to have been a further steep upturn in new house building starts in April, the trend remains well short of estimated increases in underlying demand each year.

“Set against the tightening supply chain backdrop, a difficult challenge lies ahead for the housebuilding sector to make sure it doesn’t hit a ‘brick ceiling’.”