News

UK Construction PMI - September 2020

06-10-2020

 - UK construction activity expands sharply in September

 - Faster activity growth amid steep rise in home-building

 - Quickest rise in new business since before lockdown

 - Input buying increases at sharpest rate for almost five years

Latest PMI® data signalled another sharp increase in UK construction activity at the end of the third quarter. The expansion came amid the sharpest rise in new business since before the pandemic-induced lockdown, with firms increasing their purchasing activity at the quickest pace for nearly five years. Meanwhile, employment continued to fall, but the rate of job shedding eased.

Looking forward, sentiment towards future activity was the strongest for seven months.

The headline seasonally adjusted IHS Markit / CIPS UK Construction Total Activity Index registered 56.8 in September, up from 54.6 in August. Any figure above 50.0 indicates growth of total construction output. The latest reading pointed to a reacceleration in the rate of activity growth and a sharp increase overall.

Underlying data revealed varied results across the three monitored sub-sectors. The strongest performing category was home building, where firms registered a sharp expansion in activity for the fourth month running. Work undertaken on commercial projects also rose strongly, increasing at quickest pace for over two years. Meanwhile, civil engineering activity fell for the second month running and at the sharpest rate since May.

Anecdotal evidence suggested that the expansion in overall activity was predominantly driven by an improvement in demand conditions during September.

New orders rose for the fourth time in as many months, with panellists continuing to mention a release of pent-up demand. In fact, the latest increase was the strongest since just before the escalation of coronavirus disease 2019 (COVID-19) pandemic.

In line with the rise in new work, UK construction firms recorded another marked increase in purchasing activity at the end of third quarter. Moreover, the rate of growth accelerated to the fastest since October 2015.

On the employment front, staff numbers continued to fall in September. However, the rate of workforce contraction eased to the slowest for seven months. When explaining job cuts, some panellists mentioned releasing furloughed workers following a restructuring of their operations.

Meanwhile, cost burdens faced by building companies continued to rise. That said, the rate of inflation eased for the first time in six months to the weakest since May. Panellists often noted higher raw material prices amid shortages at suppliers, with data indicating another sharp deterioration in vendor performance.

Finally, confidence towards the 12-month business outlook was the strongest since February. Optimism was supported by expectations of a sustained rise in new work.

 

Source: www.markiteconomics.com