Markit/CIPS UK Construction PMI shows output increase

Output performing better than in April and confidence also on the rise.

The May results were released this morning for the Markit/CIPS UK Construction PMI and the results showed an increase from the April level.

Both output and confidence levels across the sector were up, with the former up from 54.2 in April to 55.9 in May.

Although this is the second-lowest reading since June 2013, the evidence of respondents suggests that the May figure has suffered from the drag factor caused by weaker new business levels in the previous two months, which generally happens before a General Election.

In addition, today’s figure is evidence of the first time output growth has accelerated since February and the level is still well above the neutral mark of 50.0.

Output gains were put down to residential building activity and the civil engineering sub-sector returning to growth.

Survey respondents also reported incoming new work has increased, in line with client confidence and the aftermath of the General Election which sees businesses more willing to part with money.

Confidence levels in the construction industry have experienced a sharp increase regarding business activity for the next year.

Of those who responded, almost 60% expect a rise in the level of output, with new project wins and a willingness to spend after the General Election given as major factors in this increase.

This level of confidence is at its highest since February 2006 and in addition, employment numbers are also on the rise – the quickest they have increased this year.

David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, spoke about the “steady” improvement.

He said: “The brakes are now off for the construction sector as it makes up for some of the losses over the last few months with a steady and comfortable improvement.

“Though nothing like the highs of 2014, the quietly confident approach after the restraint displayed before the General Election, shows business confidence is at its highest since February 2006.”

Ashraf Laidl, who is the Chief Global Strategist at www.cityindex.co.uk, added that the ‘much needed’ results also suggests positive news for the housing market.

He said: “UK construction PMI recovered to 55.9 in May from April’s 54.9, exceeding market expectations of 55.0. The rebound is much needed after the index dipped to ten-month lows in April.

“The other piece of positive news is the mortgage approvals figure for April, which hit a 14-month high of 68,100, conveying the notion of an improving housing market from both purchasing and building perspectives.”

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