Construction output picked up in November, a closely-watched survey showed on Monday, as supply bottlenecks started to ease.
The IHS Markit/CIPS UK Construction PMI total activity index was 55.5 in November, up on October’s 54.6. The reading – which IHS Markit said signalled a “robust and accelerated” expansion – beat consensus. Most analysts had expected the index to nudge down to 54.2.
A steeper rise in the commercial construction index – to 56.5 – helped offset a slight fall in the house building index, which eased to 54.7 from 55.4. Engineering was the weakest of the three sub-sectors, at 53.9, though the latest rise in activity was the largest since August.
The portion of respondents citing longer delivery times was 47%, significantly down on June’s peak of 77%, and both new business volumes and business activity rose.
However, cost pressures remained significant, with rapid input price inflation and haulage driver shortages. Around 72% of respondents reported an increase in purchase prices.
Tim Moore, director at IHS Markit, said: “Input price inflation remains extremely strong by any measure, but it has started to trend downwards after hitting multi-decade peaks this summer. The latest rise in purchasing costs was the slowest since April, helped by a gradual turnaround in supply chain disruption and a slight slowdown in input buying.
“Port congestion and severe shortages of haulages capacity were again the most commonly cited reasons for longer lead times for construction products and materials.”
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Commercial orders were the strongest, picking up the slack from the subdued housing and civil engineering sectors and demonstrating that business confidence in the UK economy was improving.
“Job hiring growth was still maintained in November, but was the weakest since March. Builder optimism was somewhat flat as the costs of building still remained high and firms struggled to stay competitive.”
Gareth Belsham, director of surveyors Naismiths, said: “The report marks a welcome return to output growth. While the boom times seen earlier this year are certainly not back, the worst of the supply chain crisis is past.
“The construction industry is famously adept at handling peaks and troughs in demand. The past few months have seen it confronted by a double-whammy of strong demand and a chronic shortage of supply, and the [print] is a reassuring sign that it is once against starting to take the strains in its stride.”
However, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, struck a more cautious note. He said: “The survey was conducted between 12 and 29 November, almost entirely before Omicron emerged. The uncertainty created by the virus likely will have persuaded some businesses to wait a little longer to sign off new projects.
“Meanwhile, commercial property vacancies likely will increase from March, when the government will end the evictions ban, thereby reducing demand for new buildings. In addition, the outlook for mortgage rates to rise and real household disposable income to fall over the coming months suggest that demand for new homes will soften.
“With construction output still 1.8% below its January 2020 level in September, it probably will take until mid-2022 for that gap to be closed on a sustained basis.”
