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Housing fuels return to growth for construction according to CIPS

Housing has fuelled the first return to growth in construction activity since October 2012, according to latest figures from Markit and The Chartered Institute of Purchasing & Supply.

The Construction Purchasing Managers’ Index stood at 50.8 in May 2013, up from 49.4 in April, the first time since October 2012 that the index has surpassed the 50.0 figure denoting no change in activity.

Markit/CIPS has however warned that the rise continues to run below the long-term average of 53.9 and represents only a marginal pace of expansion.

The growth was fuelled by accelerated levels of housing activity in the month, with the increase the fastest recorded in 26 weeks. But the growth in pace in housing is offset by continued declines in civil engineering and commercial work.

The figures appear somewhat in line with the latest Glenigan Index, released this week and showing a 2 per cent rise in construction starts in the three months to May 2013, largely owing to a rise in private housing, but also civils work that has been delayed partly due to poor weather conditions at the start of the year.

New business improved for the first time in “months”, according to the figures from Markit/CIPS, though demand was again strongest in the residential sector. Around four-in-ten of the firms surveyed forecast a rise in output over the next 12 months, against the 13 per cent that predicted a decline.

Meanwhile, input costs were up for the 40th continuous month, the survey found.

Tim Moore, Markit senior economist, said: “UK construction output appears to have finally pulled out of a tailspin in May, but the latest figures suggest that the sector is worryingly reliant on residential building work for thrust.

“Construction firms cited improving house building activity as the key factor behind a rise in new orders for the first time since May 2012. Meanwhile, shrinking spending on both commercial and civil engineering projects acted as a drag on overall new business growth.

“While the latest survey provides some hope that rising construction output will support UK GDP in the second quarter, the sector remains unlikely to contribute positively to labour market conditions. May data indicated stagnant employment levels at construction firms, with survey respondents noting that cautious job hiring polices persisted across the sector in spite of a slight improvement in output volumes.”

 

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