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Construction output growth hits 24-year high

TAI

Recovery in UK construction output gains further momentum as prices see PMI survey-record rise in June

THE recovery in UK construction output gained further momentum during June, according to the latest PMI data. At 66.3 in June, up from 64.2 in May, the seasonally adjusted IHS Markit/CIPS UK Construction PMI Total Activity Index signalled the strongest rate of output growth since June 1997 – exactly 24 years ago.

Construction work in the house-building sub-category (index at 68.2) increased at the fastest pace since November 2003. The second-best-performing area was commercial work (66.9), with output rising at the strongest rate since March 1998. Meanwhile, civil engineering activity rose sharply in June (60.7), but the speed of growth eased to a three-month low.

Survey respondents widely commented on a rapid turnaround in demand for new construction work, especially residential building and commercial projects related to the reopening of the UK economy. Total new orders have increased in each of the past 13 months, although the latest expansion was slower than May’s survey-record high.

Suppliers’ delivery times also lengthened to the greatest extent since the survey began just over 24 years ago, surpassing the previous record seen in April 2020, with severe shortages of many construction products and materials – particularly cement, concrete, plaster, steel, timber and roof tiles – resulting in a survey-record rise in purchasing prices in June.

Tim Moore, economics director at IHS Markit, who compile the survey, said: ‘June data signalled another rapid increase in UK construction output as housing, commercial and civil engineering activity all expanded at a brisk pace.

‘The headline index signalled the fastest rise in business activity across the construction sector for 24 years. Total new orders expanded at one of the strongest rates since the summer of 2007, mostly reflecting robust demand for residential projects and a boost to commercial work from the reopening UK economy.’

Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), added: ‘The meagre availability of raw materials placed obstacles in the path of stronger workflows where supplier delivery times extended into record-breaking territory once again and surpassed the height of disruption when the pandemic first hit.

‘Construction’s heavy load remains inflation rising to its highest rate since April 1997 as a staggering 86% of respondents reported paying more for their goods in June.’

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