Positive signs?
The final quarter of 2011 started more positively for UK constructors, according to the latest data from Markit.
After easing to near-stagnation in September, growth of total industry activity accelerated. This was supported by renewed growth of new business. Consequently, firms continued to recruit staff and raise buying activity. However, input cost pressures intensified.
The seasonally adjusted Markit/CIPS Construction Purchasing Managers’ Index (PMI) registered a five-month high of 53.9 in October, up from 50.1 in September. The latest reading signalled a stronger rise in UK construction sector output.
Sub-sector data revealed improved performances from both the commercial and civil engineering industries. Housing remained the laggard, posting another contraction in activity, although the rate of decline slowed to a marginal pace.
New orders picked up in October, after a slight fall in September. Growth was robust and the most marked since May. Panellists indicated that demand was boosted by competitive quotations and strong company reputations.
Gains in new work led constructors to buy additional inputs and recruit extra staff in October. Buying activity increased at a solid and accelerated pace, although job creation eased slightly to a fractional rate.
Sub-contractor usage fell in October, as has been the case in 46 of the past 47 months (demand increased slightly in September). Their availability improved as a result, although the quality of their work deteriorated. Rates charged by trade contractors were unchanged on the month.
Stronger demand for inputs, alongside insufficient capacity at vendors, resulted in longer lead times in October. Supplier performance has worsened, on average, in each of the past 14 months. One-tenth of the survey panel reported delivery delays during the latest survey period, against less than 4% that saw an improvement.
Picking up from September’s ten-month low, input price inflation was marked in October. Respondents cited higher fuel and raw material costs as the main sources of upward pressure. Even so, the rate of increase remained slightly below the year-to-date average for the series.
Sarah Bingham, Economist at Markit and author of the UK Construction PMI said: “The outlook for the sector remains uncertain, with October seeing a further weakening in sentiment regarding business expectations; confidence was at its lowest level since December 2008. Furthermore, the increase in employment recorded was fractional, despite the rise in new business and activity. This suggests that constructors remain tentative about the longevity of the sector’s growth profile.”
Scottish Building Federation chief executive Michael Levack said: “Although the data shows some modest recovery in the industry in October, it is worrying to see that the housebuilding sector continues to struggle and general confidence among industry employers remains very shaky. There is an ongoing concern that recovery in the private sector remains weak and significant cuts in public spending are likely to hamper the industry’s prospects over the next 12 months and beyond.”
