Construction PMIs for May 2023 found that output increased at the fastest pace for three months, although house building remains laggard
The latest construction PMIs released indicate that despite overall construction output increasing, the level of success between sectors varies significantly.
Commercial building (index at 54.2) and civil engineering activity (index at 53.9) both rose, lifting the overall construction output figures.
Meanwhile, house building remained by far the weakest-performing category of activity, with output declining at the steepest pace for three years (since May 2020).
Slow but steady construction output overall growth was observed
The headline seasonally adjusted S&P Global / CIPS UK Construction Purchasing Managers’ Index® (PMI®) –registered 51.6 in May, up from 51.1 in April and above the neutral 50.0 mark for the fourth consecutive month.
Although the change in figures may seem minor, it is in fact the strongest upturn in construction activity since February.
Adverse industry circumstances are believed to have softened, leading to May’s improved conditions. Average lead times for delivery of construction materials and products shortened to the greatest extent seen since August 2009, as well as input cost inflation becoming its weakest in 32 months.
Purchasing price inflation has eased sharply in the last two months, which
some firms linked to rising competition among suppliers alongside softer demand for construction inputs. Although cost burdens remain robust, inflation rates are at their weakest for just over two and a half years.
Staffing numbers enjoyed their fourth consecutive month of growth.
However, house building is still sinking
Both commerical and civil engineering remained strong, but housing activity decreased for the sixth month running and at speed.
Aside from the pandemic-related downturn, the latest reading for this category of construction output activity (42.7) was the lowest for just over 14 years.
Despite housing’s continued dip, the outlook was optimistic
Around 45% of those surveyed predicted an increase in construction output levels, while less than a sixth(14%) expected a decline.
Factors that dragged this outlook down include concerns about the UK economic outlook and continued rising interest rates.
Beard finance director Fraser Johns said: “We should be cautiously optimistic about the fact that we seem to have avoided the recession and sector-wide decline that many predicted at the beginning of the year. So much so, that there are reasons to be positive about the economic outlook for some areas of construction.
“New work continues to rise at a strong pace. Some material price rises are stabilising, construction products are seeing the shortest lead times in more than a decade and pressures on labour are easing with workforce availability improving and vacancies falling.
“However, these encouraging factors are slightly clouded by inflation being stickier than hoped, which has an impact on our people and the challenges they continue to face.
“In other words, we are by no means out of the woods. Realistic tendering, laser-focused cost control, renewed emphasis on supplier and stakeholder relationships and the ability to continue to adapt to project demands will remain key as the year progresses.”
You can read more commentary and figures from the latest Construction PMI report here.
