Markit/CIPS UK Construction PMI released for May

Construction output growth continues slowdown.

UK construction output growth in May continued to slowdown and saw the first fall in new orders since April 2013 according to the latest Markit and the Chartered Institute of Purchasing & Supply (CIPS) UK Construction Purchasing Managers’ Index (PMI) figures.

The UK construction PMI figure for May fell to 51.2, down from 52.0 in April and now hovering precariously just above the growth threshold rate of 50.0.

Output growth is now at its weakest level for nearly three years. Market conditions were reported to have dropped amid continued uncertainty ahead of the EU referendum.

Worryingly, the residential building work rose at one of its slowest rates since the beginning of 2013. Commercial activity was also at its slowest for almost three years.

Civil engineering was the worst performing sector as growth stagnated during May.

Mood within the construction industry continues to be quite positive, however, with 51% predicting an increase in output over the next 12 months. Only 14% expected to see a decrease.

A positive for construction industry came in the shape of employment with job creation in May hitting its highest level for four months.

Respondents were asked a special question on the impact of the EU referendum with the results showing one in third businesses felt that the uncertainty surrounding the issue was having a negative impact. 5% said the impact was ‘strongly detrimental’.

55% reported no significant impact, while 9% of respondents were unsure whether ‘Brexit’ worries were a factor impacting on their business.

Tim Moore, Senior Economist at Markit, said: “Survey respondents noted that the forthcoming EU referendum has disrupted new order flows and the timing of client decision making in particular. Heightened uncertainty and subdued general economic conditions in turn contributed to the first outright fall in new work received by construction firms for just over three years.

“The main positive aspect was a pick-up in staff hiring to its fastest since the beginning of the year. Positive employment trends not only contrasted with falling new order volumes in May, but the gap between these indices was the largest since the survey began in 1997.

“An optimistic interpretation is that construction firms are looking through the second quarter weakness and feel that workloads will recover momentum. However, should this fail to materialise later in 2016, then job creation is likely to come under pressure given its elevated trend relative to current demand patterns.”

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