Revsion Below
Key points:
ƒ Output growth eases from 21-month high seen in March
ƒ Moderate job creation maintained in April ƒ Input cost inflation lowest since March 2010
UK construction companies indicated a continued recovery in business activity and new order inflows
in April, again led by work on commercial projects. This in turn contributed to employment growth for
the second month running, and confidence in the 12-month outlook remained much stronger than
throughout much of 2011. UK construction companies reported another solid increase in their purchasing activity in April, extending the current period of growth to 16 months. However, higher levels of input buying,
alongside reports of low stocks at suppliers, resulted in another deterioration in average vendor
performance. Delivery times from suppliers have lengthened in each month since September 2010.
Use of subcontractors was largely unchanged compared to March, though rates charged fell for
the first time in four months, signalling increased competition among subcontractors. Input price inflation meanwhile eased in April to its lowest for just over two years, helped by reports of
a moderation in raw material cost inflation. Average cost burdens have nonetheless now risen for 27
months running, with the latest increase largely attributed to higher fuel and energy prices.
Comment:
Tim Moore, Senior Economist at Markit said: “April saw another generally buoyant UK
Construction PMI survey, with rates of output and new order growth close to March’s recent highs.
Improved inflows of new work have also helped raise business expectations in the sector from the
three-year low seen last Autumn. “The upturn in businesses’ expectations on a yearahead horizon represents something of an antidote to the news that the construction sector doubledipped in Q1. However, it should be noted that since the 2010 government spending review, the level of confidence in the construction industry has consistently run well below the average seen in the decade before the financial crisis, suggesting there
has been a widespread loss of optimism since the deficit-fighting austerity measures were first
announced. The worry is that the sector may suffer from a lack of large-scale new projects once current
undertakings such as the Olympics are completed. Further evidence of underlying fragilities also
persisted in the beleaguered housing sector where activity growth fell well short of the trend in the
wider construction economy. “Cautious job hiring trends meanwhile continued
across the UK construction sector, with firms generally able to expand their business activity
without needing to take on more staff. This perhaps reflected the deeper malaise in the sector, with
excess capacity meaning that construction companies are looking for a much stronger pipeline
of new projects before new employees are taken on in significant numbers.”
Commenting on the report, David Noble, Chief Executive Officer at the Chartered Institute of
Purchasing & Supply, said: “This month’s Construction PMI figures point
towards the continued recovery of the construction sector. However, despite good news for order
books and a rise in purchasing activity since the start of the year, it’s worth remembering that there
is still a long way to go to match the expectations of growth seen before the 2010 spending review.
“In particular, growth in new contracts won and improved confidence, have not yet been
accompanied by comparable increases in employment, which may indicate some fragility in
the sector for the longer-term. Performance in housing, although slightly higher than last month,
remains the poor relation to commercial and civil engineering. “Suppliers too are under pressure, having reduced capacity during the downturn, they are now struggling to replenish inventories. This has led to
increased delivery times and adds a further drag on the industry as a whole.”
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