The UK construction industry enjoyed a very solid start to the year according to the sector's new PMI survey. At 59.1 the headline index was 1.6 points higher than its minimally downwardly revised December print and comfortably above market expectations.
The pick-up off December's 17-month low still left the second weakest reading since September 2013 but this simply reflects the longstanding buoyancy of activity. All three main categories saw higher activity rates with residential building leading the way. Commercial construction also performed well and civil engineering rebounded from a decline at year-end.
New business increased at an accelerated pace and the fastest rate in three months but remained well below its 2014 calendar year average. Employment actually expanded more slowly than in December but capacity pressures were again evident in longer supplier delivery times and a near-record rise in sub-contractor charges. Even so, falling energy prices saw overall input cost inflation ease to its lowest level since April 2013.
Business optimism remained positive but also posted its softest reading since October 2013. As such, the overall impression is of a solidly performing construction sector that, while well past its period of peak strength, should still provide a handy boost to real GDP growth this quarter.
The Markit/CIPS UK Construction PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 170 construction companies. The panel is stratified geographically and by Standard Industrial Classification (SIC) group, based on the regional and industry contribution to GDP. Unlike other PMIs, this PMI focuses on one industry, namely UK construction.
The survey is based on techniques successfully developed in the USA over the last 60 years by the National Association of Purchasing Management. It is designed to provide one of the earliest indicators of significant change in the economy. The data collected are not opinion on what might happen in the future, but hard facts on what is actually happening at 'grass roots' level in the economy. As such the information generated on economic trends pre-dates official government statistics by many months.
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