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Slowest rise in UK construction output for 17 months

Robust overall output growth continued across the UK construction sector in December, but the pace of growth eased for the third month running.
At 57.6, down from 59.4 in November, the seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI®) signalled the least marked increase in construction output since July 2013. However, the latest reading was higher than the long-run series average (54.5) and well above the 50.0 value that separates expansion from contraction.

House building remained the strongest performing sub category, although the pace of expansion moderated to its least marked since June 2013.

Commercial construction also increased at a solid pace, albeit slower than in the previous month. Civil engineering activity decreased slightly, ending a 17-month period of continuous expansion.

Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI®, said: “UK construction output growth retreated further in December, but another strong expansion of house building activity ensured that the sector continued to perform impressively overall. Indeed, over the course of 2014, UK construction firms recorded the strongest calendar year of residential building since the survey began in 1997.

“A sharp recovery in house building, as well as resurgent demand for commercial development projects, continued to boost staff recruitment and sub-contractor pay rates across the construction sector in December.

“While new business growth moderated to its lowest for a year-and-a-half in December, UK construction firms are still highly upbeat about their prospects for output growth in 2015.

“Four times as many construction companies (52%) anticipate an upturn in output over the year ahead as those that expect a reduction (13%). Positive sentiment was linked to strong pipelines of work-in-hand and favourable underlying business conditions. However, concerns related to supply chain pressures and deepening skill shortages were prevalent among survey respondents in December.”

About Fiona Russell-Horne

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

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