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UK construction activity strengthens in December

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World Cement,

The UK construction sector ended 2016 strongly, according to a survey of purchasing executives in construction companies.

The Markit/CIPS UK Construction Purchasing Managers’ Index (PMI), which is based on a survey of purchasing executives in over 170 construction companies, rose to 54.2 in December – up from 52.8 in November. Anything above 50 indicates growth.

“December’s survey data confirmed a solid rebound in UK construction output during the final quarter of 2016,” said Tim Moore, Senior Economist at IHS Markit and author of the Markit/CIPS Construction PMI. “All three main areas of construction activity have started to recover from last summers’ soft patch.”

New business volumes increased at the strongest rate since January 2016, marking a sustained recovery from the soft patch in construction activity seen over the summer last year.

The residential sector was the key engine of growth for the construction sector, continued Moore, while commercial activity was slow on the back of subdued investment spending and economic uncertainty.

It is not all plain sailing, however, as the sector faces rising cost pressures as a weak pound drove up the cost of imported raw materials. Supplier lead times also lengthened as forward purchasing from construction firms led to low stocks among suppliers.

“Prices continued on their upward inflationary trajectory, at the strongest rate for five and half years,” said David Noble, Group CEO of the Chartered Institute of Procurement and Supply. “In response, firms have increased their stock buying to not only fulfill new orders, but also to counteract anticipated price increases throughout the year, as inflationary pressures are set to continue and the weakness of the pound continues.”

The short-term outlook remained positive, however, as improved demand conditions continue into the new year. According to the survey, around half of respondents expected a rise in business activity during the next 12 months, while only 13% were forecasting a fall. This degree of confidence represented a three-month high amid hopes that strong order books would offset any Brexit-related turbulence.

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