Construction output rebounds after 2016 recession

by: Carmen Reichman
  • 04/01/2017
  • 0
Construction output rebounds after 2016 recession
The construction sector has returned to strong growth after plunging at the beginning of last year, the latest Markit/CIPS Construction Purchasing Managers’ Index has shown.

According to the data, overall construction output has grown steadily over four months consecutively, leading to its fastest pace of expansion for nine months in December.

Residential house building was the best performing sector at the end of 2016, expanding faster than in any of the preceding 11 months, while commercial construction increased only marginally, it showed.

The report’s findings suggested rising demand from clients and a general rebound in business conditions had helped lift the sector in December.

The robust growth had also led to businesses creating jobs, with December’s rise in employment being the fastest since May, although still lower than the average rates seen in the years following 2013.

Group chief executive at the Chartered Institute of Procurement & Supply (CIPS), David Noble, said: “The residential sector raced ahead this month, with the fastest pace of growth since January 2016. Strong pipelines of new work were reported across all sub-sectors, and construction firms showed improved confidence after the impacts of uncertainty around the EU referendum.”

High import prices

However, it is not all good news. The sector faced intense cost pressures as a result of the drop in the value of the pound following Brexit, which saw suppliers passing on higher prices on imported raw material.

The latest rise in overall costs was the steepest in five-and-a-half years, Markit said.

Senior economist Tim Moore said: “The main negative development in December was a sustained acceleration in input cost inflation to its strongest since 2011. UK construction companies noted that the weaker sterling exchange rate had resulted in higher costs for a wide range of imported materials, while some also reported that forward purchasing of inputs had led to depleted stocks among suppliers.”

Positive outlook

Meanwhile, construction companies were seen to be fairly positive about their growth prospects in the coming year, citing that strong order books would help alleviate any Brexit-related turbulence in 2017.

About half of the survey panel (48%) said they anticipated a rise in business activity during the next 12 months, while 13% forecasted a reduction.

North London estate agent and a former RICS residential chairman Jeremy Leaf said: “Certainly if the construction figures translate into more supply then that will clearly be encouraging for the market as demand remains healthy irrespective of the many political and economic distractions.”

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