News

UK Construction PMI - July 2020

06-08-2020

 - Fastest rise in construction output since October 2015

 - Growth led by sharp increase in house building

 - Modest improvement in new order books during July

 - Employment falls at a faster pace than in June

UK construction companies signalled a sharp and accelerated expansion of business activity during July, led by another strong increase in house building. New orders also picked up for the second month running, with survey respondents commenting on a boost to sales from easing lockdown measures and the restart of work on site. However, the speed of recovery was insufficient to prevent additional cuts to employment numbers across the construction sector and the rate of job shedding was faster than in June.

At 58.1 in July, up from 55.3 in June, the headline seasonally adjusted IHS Markit / CIPS UK Construction Total Activity Index registered above the 50.0 no change threshold for the second consecutive month. The latest reading signalled the steepest expansion of overall construction work since October 2015.

Residential building was the main growth driver in July, with activity increasing to the greatest extent since September 2014. Survey respondents commented on the release of pent up demand and reduced anxiety among clients.

Commercial work and civil engineering activity both expanded at slightly quicker rates than in June. Growth was often attributed to the catch up of work that had been delayed during the coronavirus disease 2019 (COVID-19) pandemic.

July data indicated the fastest rise in new orders since February, although the rate of expansion remained softer than that recorded for output levels. Some construction companies noted a gradual improvement in demand from the lows seen during the second quarter of 2020. There were reports that clients remained apprehensive about committing to new projects, resulting in intense competition to secure sales and squeezed margins.

Construction firms are optimistic overall about the prospect of a recovery in business activity during the next 12 months. Around 43% of the survey panel expect a rise in output over this period, while only 30% forecast a fall. However, confidence moderated since June, which was linked to concerns about the economic outlook and a lack of new work to replace completed projects.

Worries about the speed of recovery contributed to a sustained decline in staffing numbers during July. The latest data signalled a sharp rate of job shedding, with around one-in-three survey respondents (34%) reporting a fall in employment.

Meanwhile, input cost inflation reached its highest level since May 2019. Pressure on costs was partly linked to stretched supply chains, as signalled by another steep lengthening of average lead times among vendors in July.

 

Source: www.markiteconomics.com