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Construction buyers see fastest rise in orders in 14 months

2 August 2018 | By Neil Gerrard

Construction enjoyed an unexpected boost in July, as buyers reported the fastest rise in orders in 14 months.

The IHS Markit/CIPS Construction PMI index revealed a "robust and accelerated" rise in construction activity last month.

It attributed the increase to the fastest acceleration in residential work for just over two and a half years.

The PMI posted a score of 55.8 for the month, up from 53.1 in June and above the 50.0 no-change value for the fourth month running.

House building was the best performing category of construction activity in July, with the latest upturn the strongest since December 2015. Commercial work also picked up at the fastest pace for just over two and a half years. Civil engineering activity increased only moderately, but still rose at a faster rate than in June.

There was a general improvement in client demand had led to successful contract negotiations on larger scale projects, according to survey respondents.

Caution still prevails

However, despite an upturn in tender opportunities, construction companies are cautious about the year ahead. The degree of positive sentiment about future workloads was unchanged since June and remained weaker than the long-term survey average.

Supply chain pressures continued in July, which contributed to another sharp lengthening of delivery times for construction products and materials.

However, input cost inflation moderated from the nine-month high seen in June.

Tim Moore, associate director at IHS Markit and author of the IHS Markit/CIPS Construction PMI said: “July data reveal an impressive turnaround in the performance of the UK construction sector, with output growth the strongest for just over one year.

"While the recent rebound in construction work has been flattered by its recovery from a low base earlier in 2018, there are also signs that underlying demand conditions have picked up this summer. New business volumes expanded at the strongest rate since May 2017, while workforce numbers increased to the greatest extent for just over two and a half years.

"UK construction companies experienced substantial cost pressures in July, driven by rising fuel bills and higher prices for steel-intensive items. Meanwhile, supply chains struggled to keep up with greater demand for construction products and materials, which resulted in the greatest lengthening of delivery times since July 2017.”

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