MNI: UK June Construction Sector Activity Up from May

-CIPS/IHS Markit UK Construction PMI 53.1 in June vs 52.5 in May

By Jai Lakhani

     LONDON (MNI) - The UK construction sector PMI rose to 53.1 in June from

52.5 in May, indicating the fastest pace of construction output growth since

November 2017.

     The report details revealed that the overall output expansion was

underpinned by strong growth in residential work and commercial building, the

latter of which expanded at its fastest pace since February. Whilst residential

work remained the best performing area of activity, civil engineering activity

continued to stutter, with the rate of growth easing to a three-month low.

     Positively, survey respondents noted a general improvement in client

demand, which helped to boost construction workloads in June. As a result of

this, the rate of new business growth was the strongest for just over one year

in June.

     As a knock-on effect from new business growth, there were faster increases

in employment numbers and purchasing activity during June. The pace of job

creation was its strongest for one year. Meanwhile, the rise in input buying was

the steepest since December, partly due to new projects but also to lock in

lower input prices in expectation of forthcoming rises.

     The overall outlook for near-term growth in the construction sector looks

bright, especially given the strongest rise in new orders since May 2017 and the

largest upturn in input buying for two-and-a-half years.

     Unsurprisingly, these encouraging developments supported a rebound in

business optimism in June from May's seven-month low, although it is worth

noting that the degree of positive sentiment is still below the long-run survey

average.

     --COST PRESSURES UP

     The latest increase in input prices was the steepest for nine months,

attributed to greater transportation costs and higher prices for metals, most

notably steel. Furthermore, vendor lead times lengthened further due to low

stocks and capacity constraints among suppliers.

     --SECTOR'S "BRAKES ARE OFF"

     The June PMI suggests a slightly rosier picture than the one outlined in

May. As Tim Moore, Associate Director at IHS Markit points out: "The latest

increase in UK construction output marks three months of sustained recovery from

the snow-related disruption seen back in March."

     Duncan Brock, Director of Customer Relationships at the Chartered Institute

of Procurement & Supply, added: "With the fastest rise in new orders since May

2017, it appears the brakes are off for the construction sector. Despite being

hampered by economic uncertainty, firms reported an improved pipeline of work as

clients committed to projects and hesitancy was swept away."

     However, Brock cautioned that: "A cloud of uncertainty remains, given the

sector's hit and miss performance so far this year and lower than average

business confidence in June."

--MNI London Bureau; +44 203 865 3828; email: jai.lakhani@marketnews.com

--MNI London Bureau; +44 207-862-7489; email: ukeditorial@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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