Markit/CIPS UK Construction PMI released for September

The construction industry returned to growth in September according to the latest Markit/CIPS UK Construction PMI figures.

For the first time since May, the construction industry recorded an upturn in activity.

The increase was fundamentally driven by a recovery in residential housebuilding. Companies cited a resilient demand and improving market conditions for the upturn.

The Construction PMI reading was 52.3 for September, up on August’s figure of 49.2 and above the threshold for growth of 50.0.

The reading is well above July’s seven-year low and revealed the fastest rise in construction output since March.

There was also an increase in civil engineering output, rising at its fastest rate since March.

Commercial construction activity decreased for the fourth month running, albeit only slightly.

There was a rise new work reported for the first time since April.

Employment levels also saw a slight increase in September but the use of sub-contractors fell at one of the fastest rates since late 2013.

Confidence within the industry would appear to be less affected by the uncertainty surrounding Brexit, with confidence levels at their highest levels since May.

Tim Moore, Senior Economist at IHS Markit commented: “UK construction companies moved back into expansion mode during September, led by a swift recovery in residential building from the three-and-a-half year low recorded in June.

“Resilient housing market conditions and a renewed upturn in civil engineering activity helped to drive an overall improvement in construction output volumes for the first time since the EU referendum.”

Mr Moore said that the worry surrounding UK’s decision to leave the European Union appears to be slightly diminishing but was still having an impact in the shape of a decline in commercial building work.

In terms of industry confidence, Mr Moore said that companies appear to be “reasonably optimistic” about their short-term prospects due in part to the fastest increase in new orders since March and a more positive news surrounding the state of the economy.

Mr Moore said that the survey still highlighted concerns for the construction industry. He commented: “The sector remains on a much weaker growth trajectory than seen at the start of 2016, which contrasts with the export-led surge in manufacturing production during September.

“Not only are UK construction companies feeling the impact of subdued investment spending relative to earlier this year, but the weak pound has contributed to a sharp acceleration in cost inflation. There were again widespread reports that domestic suppliers had acted quickly to pass on higher imported raw material costs, despite softer demand conditions in recent months.”

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