Latest PMI data
signalled only a modest improvement in UK construction activity midway through
the second quarter, with the pace of expansion matching that registered in
April.
Commercial activity
growth accelerated to a three month high in May; however, softer expansions in
both residential and civil engineering activity were recorded.
Furthermore, new order
books contracted for the fourth time in the past five months amid general
uncertainty in the sector.
At 52.5 in May, the
seasonally adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index
(PMI ) remained unchanged since April. The figure was indicative of a moderate
increase in total activity, albeit one that was subdued in the context of historical
data.
Some firms suggested
that unusually good weather conditions had supported activity and enabled them
to continue catching up after prior months’ weather-related disruptions.
Residential work
remained the strongest of the three monitored sub-sectors for the third month
running during May. The pace of expansion eased from April’s 11-month high,
which had seen house building activity rebound from heavy snow in March. Both
the commercial and civil engineering sectors remained in growth territory for
the second month running in May, with the former being the only category to
record a faster rate of expansion than in April.
New order books
slipped back into decline during May. Panel respondents blamed political and
economic uncertainty, subdued retail sector conditions and fragile business
confidence as key causes of weaker demand for construction projects. That said,
the rate of contraction was only fractional and slower than the declines seen
throughout the first quarter. Optimism towards future growth prospects
meanwhile slumped to a seven-month low in May. The drop in confidence was
linked to fears of political and economic uncertainty and an expected slowdown
in the construction sector.
Alongside easing
positive sentiment, job creation softened to a four-month low in the latest
survey period. Surveyed companies continued to report a shortage of skilled
staff availability. Purchasing costs faced by construction firms rose sharply
in May. The rate of input price inflation was the steepest registered since
February. Panel members commonly reported elevated fuel costs, alongside higher
plastic and steel-related input prices. Supplier delivery times continued to
worsen in the latest survey, though the degree of deterioration was one of the
weakest over the past year-and-a-half. Where longer times were reported,
businesses frequently blamed shortages of materials at vendors.
Sam Teague, Economist
at IHS Markit and author of the IHS Markit/CIPS Construction PMI: “The May PMI
data signalled an unchanged pace of activity growth across the UK’s
construction sector since April’s somewhat underwhelming rebound, yet
nevertheless indicating a recovery in the second quarter after the contraction
seen at the start of the year.
“However, activity in
May was once again buoyed by some firms still catching up from disruptions
caused by the unusually poor weather conditions in March, and a renewed drop in
new work hinted that the recovery could prove short-lived.
“Inflows of new
business slipped back into decline, signalling the resumption of the downward
trend in demand seen during the opening quarter. Companies frequently noted
that Brexit uncertainty and fragile business confidence led clients to delay
building decisions in May.
“With new order books
deteriorating and cost pressures picking back up, it’s not surprising to see
construction firms taking a dimmer view of prospects and pulling-back on
hiring, all of which makes for a shaky-looking outlook.”
Duncan Brock, Group
Director at the Chartered Institute of Procurement & Supply, said: “The two
millstones of uncertainty and weak economic growth gave the sector plenty to
worry about this month, and whilst activity still grew, the lowest business confidence
in seven months suggests the subdued pipeline of new work is having an effect.
With a decline in new orders for a fourth time in five months, it was client
hesitation and consumer diffidence towards spending that had construction
activity stuttering.
“Higher prices for
fuel, raw material shortages, higher labour costs combined with slow delivery
times were further obstacles to growth as firms nervously assessed their
workforce for much-needed talent and sub-contractors could name their price.
“However, it’s
encouraging to see the housing sector put in a strong performance for a second
month running, after stumbling at the beginning of the year, and with only
small improvements in the other sectors, residential building is keeping
construction’s head above water.
“It’s likely that the
construction sector’s performance will be a slow and steady crawl through the
second quarter, as the spectre of Brexit continues to dominate, and the double
pincer movement of few orders, and higher costs, could see the sector stutter
further.”
