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UK records sharpest increase in construction output for eight months

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World Cement,

According to the latest Markit/CIPS UK Construction PMI® Survey, strong output growth was maintained across the UK construction sector in September 2014. The Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI®) was 64.2 in September, up from 64.0 in August, representing the steepest expansion in construction output since January (and the second fastest expansion over the past seven years). Growth was supported by sharp rises in housing, commercial and civil engineering activity.

However, although the overall performance of the construction sector was close to its strongest since the summer of 2007, the data indicated that new order growth and job creation eased to their lowest for four months. In addition, supply chain pressures resulted in a further steep increase in input costs, as well as further delays in the receipt of construction materials.

Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI®, said:

“UK construction firms experienced a sustained and strong output recovery during September, in contrast to the weakening picture seen across the manufacturing sector at the end of this summer. Survey respondents highlighted that improving domestic economic conditions helped boost funding availability and foster confidence towards large-scale project commitments, especially in the commercial development sector.

“Housing activity remains the brightest spot in the construction sector, but its outperformance has started to fade. Moreover, residential construction continues to see the most intense pressures on supply chains and skilled labour availability.

“Looking ahead, construction firms are more cautious about their prospects for output growth than at any time since October 2013. Although positive overall, a range of factors tempered business optimism in September, including strong cost pressures, concerns about skilled labour supply and signs that house building growth has cooled from the multi-year records set earlier in 2014.”

David Noble, Group Chief Executive Officer at the Chartered Institute of Purchasing & Supply, commented:

“The construction industry’s strong performance continued unabated in September, sending out a reassuring message about the underlying health of the UK economy. As a sector, construction is sensitive to changes in economic fortune, so the fact that we are witnessing sustained growth bodes well as we enter the final quarter of 2014.

“Domestic housing’s mantle of star performer was dislodged slightly in September, with growth in commercial and civil engineering activities accelerating notably. The rise in commercial activity was the second fastest since the summer of 2007 and could be the most telling as it represents businesses’ willingness to invest; they are putting their money where their mouth is.

“However, pressure points in the industry are becoming ever more acute as suppliers race to catch up after years of caution and capacity cutting. This is borne out in supply chain bottlenecks as a result of strong demand for construction materials, a squeeze on subcontractor availability and the lengthening of vendor delivery times. Years of caution may now impede the sector’s performance if suppliers cannot re-stock and hire at a speed that demand requires.”

Read the full release for September’s Markit/CIPS UK Construction PMI® here.

Adapted from press release by Rosalie Starling

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