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Output and orders hit 2018 highs in June

Output and new orders in the construction industry hit their highest levels of 2018 in June, according to the latest purchasing managers’ index.

The IHS Markit / CIPS data showed the output index rose to 53.1 in June, up from 52.5 in May and the highest reading since November last year.

A reading above 50.0 indicates that output increased during the month.

New orders meanwhile hit their highest level since May 2017 last month.

CIPS group director Duncan Brooks said the survey showed “the brakes are off” for the construction industry.

“Despite being hampered by economic uncertainty, firms reported an improved pipeline of work as clients committed to projects and hesitancy was swept away,” Mr Brooks said.

Blane Perrotton, managing director at property consultant Naismiths, said the boost had come from the release of pent-up demand.

“There is only so long that investment decisions can be delayed, and on the front line we’re seeing increasing numbers of developers opting to pull the trigger before the opportunity passes them by,” Mr Perrotton said.

However, June’s rise in activity was accompanied by a rise in input costs, which recorded their steepest increase for nine months.

Transportation costs and metal prices, particularly steel, were cited as major contributors to the hike.

Mr Brock said: “Input prices were a challenge, with the biggest inflationary rise since September 2017, so the pressure was on to build up stocks of materials [that were] rising in price and becoming more scarce.

“This resulted in a heavy impact on suppliers unable to keep pace […] and purchasing managers were at their busiest for two-and-a-half years.”

Across the different construction sectors, the highest level of activity in June was seen in the residential market.

Commercial building, which has struggled over the past year, reported its fastest rate of expansion since February.

Activity in the infrastructure sector was more subdued, however, with growth easing to its slowest pace since March.

Infrastructure was cited as a critical area for growth over the next 12 months.

Lloyds Bank Commercial Banking director for construction Max Jones said: “The announcement of approval for a new runway at Heathrow has boosted sentiment in the sector, if not yet order books and revenue.

“But with Heathrow, Hinkley Point and HS2 all now given the green light, the focus shifts to the next mega-project that will offer firms comfort and visibility over their long-term pipelines.”

Scape chief executive Mark Robinson called on the government to now help the construction industry build on the rebound seen in June’s data.

“The key to maintaining this momentum is to provide clarity over the government’s Brexit policy to bolster confidence and provide certainty for the construction industry and the wider economy,” he said.

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