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UK construction industry picking up slowly; housing market flat

World Cement,

According to the  Markit/CIPS Construction Purchasing Managers’ Index® (PMI®), UK construction companies reported a seventeenth successive rise in new business received during July. An increase in new contract wins and opportunities to tender supported the expansion in new work intakes. The rate of growth was solid, but nonetheless remained below the long-run trend.

Of the three broad areas of construction activity monitored by the survey, two – commercial and civil engineering – recorded growth. Civil engineering recorded the sharpest expansion, while the rate of increase in commercial activity fell slightly. Residential construction contracted for a second consecutive month, but at a marginal rate.

July data signalled a solid rise in purchasing activity at UK construction companies, reflective of growth in new business. Suppliers’ delivery times were reported to have lengthened again, as increased input buying put pressure on operating capacity at vendors.

Input costs faced by construction companies in the UK rose for an eighteenth month running in July. The rate of input price inflation was slightly faster than in June, and remained strong in the context of historical data. Higher raw material prices were cited as the main driver of costs, with prices for fuel and copper particularly noted to have increased.

UK construction companies were optimistic in July that activity would rise over the next year. Ongoing improvements in economic conditions and increased marketing initiatives are expected to support output growth. However, the degree of confidence remained weak in the context of historical data.

Meanwhile, activity in the housing market remained flat during July, with house prices slipping further, according to the latest RICS UK Housing Market survey (9 August 2011).

Some 22% more chartered surveyors reported that prices fell rather than rose in July. While this represents a slight improvement on June’s net balance of -26, this reading has now remained in negative territory for over a year. Large deposits required by lenders appear to be a stumbling block for many would-be buyers.

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