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New order growth highest in seven months

4 January 2018

Image: Phil Hatcher/Dreamstime

New order growth in construction projects reached a seven-month high and job creation is the strongest since June, according to the latest IHS Markit/CIPS UK Construction PMI survey.

Construction PMI for December posted 52.2, down from 53.1 in November but above the 50.0 no-change threshold for the third month running. As a result, the latest reading signalled a moderate expansion of overall construction output at the end of 2017. 

Survey respondents indicated that housebuilding was a key factor in growth, with residential work expanding for the 16th consecutive month in December. In contrast, latest data indicated a moderate fall in commercial construction, thereby continuing the downward trend since July.

The latest data pointed to resilient demand for new construction projects, as highlighted by the fastest upturn in new order volumes since May.

Anecdotal evidence cited an improved flow of enquires in recent months, alongside a gradual upturn in clients’ willingness to commit to new work.

The prospect of greater workloads ahead resulted in stronger rises in employment and purchasing activity during December. In fact, the latest upturn in input buying was the steepest for two years, which survey respondents widely linked to increased business requirements.

However, despite the positive data and a rebound in new order volumes during December, construction firms indicated a subdued degree of optimism regarding the business outlook for the next 12 months.

The balance of companies expecting a rise in output levels remained among the weakest recorded since mid-2013, which survey respondents mainly linked to worries about the wider UK economic outlook.

Tim Moore, associate director at IHS Markit and author of the IHS Markit/CIPS Construction PMI, said: “The UK construction sector achieved a moderate expansion of business activity at the end of 2017, although the recovery remained uneven and slowed overall since November.” 

Construction companies indicated that another strong contribution from housebuilding helped to offset subdued civil engineering activity and reduced volumes of commercial work.

“Total new orders picked up at the fastest pace for seven months in December, which provides a positive signal for construction workloads in the short-term. Resilient demand and forthcoming project starts also led to greater job creation and the strongest increase in input buying for two years.”

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