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UK construction output rebounds at the start of 2015

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World Cement,

Markit Economics’ January data indicated a positive start to the year for the UK construction sector, with output and new business growth rebounding from the lows seen in December 2014. However, the rate of job creation slipped to a 13-month low and construction firms’ assessment of the business outlook was the second lowest seen since October 2013.

The seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI®) stood at 59.1 in January, up from 57.6 in December, pointing to a robust and accelerated expansion of overall business activity at the start of 2015. The index has registered above the neutral 50.0 threshold for 21 months running, although the latest reading was the still second lowest seen since September 2013. The latest survey indicated that overall growth momentum rebounded since December 2014, but was much weaker than the average for 2014 as a whole (61.8).

Residential building was the best performing sub-category in January, with the latest survey marking two years of continuous expansion. The data also indicated a robust rise in commercial construction and a rebound in civil engineering activity following the decline recorded in December. In line with the trend for business activity, volumes of new work increased at a robust and accelerated pace in January. The latest upturn in new work was the fastest for three months, albeit still well below the average for 2014 as a whole. However, the rate of job creation eased for the second month running to its weakest since December 2013.

“UK construction companies have found their feet again after a protracted slowdown in output growth at the end of 2014,” said Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI®. “Stronger trends were recorded across housing, commercial and civil engineering, although each category of activity still experienced much slower growth than the high-water marks achieved last year.

“In short, the peak speed of the construction recovery seems to be over, but reports of its death have been greatly exaggerated. Expectations in relation to output growth over the next 12 months remained close to December’s low, contributing to a further slowdown in construction sector job creation during January. However, skill shortages persisted at the start of the year, with construction companies indicating that subcontractor charges increased at a near survey record pace.

“Strong demand for construction materials resulted in upward pressure on costs and lengthening delivery times from suppliers in January. That said, the latest survey highlighted that lower fuel and energy prices helped drive down overall cost inflation to its lowest for just under two years,” concluded Moore.

Adapted from press release by Rosalie Starling

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