Growth slows but construction recovery continues

Grant Prior 1 year ago
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Construction buyers reported a continuing recovery in output last month but the growth rate was the slowest for five months.

The latest bellwether IHS Markit/CIPS UK Construction Total Activity Index fell to 53.1 in October from 56.8 in September.

The index has registered above the 50 no-change mark in each month since June.

House building was the star performer while commercial also grew but civil engineering activity dropped for the third month running.

October data also showed a robust increase in new work received by construction companies.

The latest improvement in new order books was the strongest since December 2015 with higher levels of new business thanks to the start of projects that had been delayed earlier in the pandemic.

The rebound in construction activity after the shutdowns continued to put pressure on supply chain capacity in October.

This was signalled by another sharp lengthening of delivery times for construction products and materials as the rate of input price inflation accelerated to its fastest since April 2019.

Looking ahead, construction companies reported optimism towards their prospects for the next 12 months, despite concerns about the wider economic outlook.

Around 45% of the survey panel anticipate a rise in output during the year ahead, while only 14% forecast a reduction.

Tim Moore, Economics Director at IHS Markit, said :”The construction sector was a bright spot in an otherwise gloomy month for the UK economy during October.

“Another sharp rise in house building helped to keep the construction recovery on track, albeit at a slower speed than in the third quarter of 2020.

“Commercial work also contributed to growth in the construction sector, while civil engineering remained the main area of concern as activity in this category dropped for the third month running.

“Supply chain difficulties persisted in October, as signalled by a sharp lengthening of delivery times for construction products and materials.

“Purchasing prices increased as a result of demand outstripping supply for construction inputs, with the rate of cost inflation hitting an 18-month high in October.

“New orders improved at the sharpest rate for nearly five years in October, suggesting a positive near-term outlook for construction activity.

“However, survey respondents commented on renewed economic uncertainty and concerns about the sustainability of the recovery as pent up demand begins to wane.”

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