UK PMIs: Construction activity grows at fastest rate in nearly seven years
Construction output grew at the fastest rate in nearly seven years in May as a record increase in new orders spurred on the industry.
IHS Markit’s Construction Purchasing Managers’ Index jumped to 64.2 from 61.6 in April, its highest level since September 2014.
The reading surpassed economists’ forecasts of 62.3, with anything over 50 signifying growth.
Growth was fastest in the housebuilding sector, reflecting a boom in the housing market, with prices surging by more than ten per cent in annual terms.
The PMI’s gauge of new orders shot up to its highest level since the survey started in 1997.
“Even allowing for the fact that the purchasing managers’ surveys can overstate movements in the economy at times of rapid change, the level of the May construction PMI is impressive,” said Howard Archer, chief economic advisor to the EY Item Club.
“UK construction companies reported another month of rapid output growth amid a surge in residential work and the fastest rise in commercial building since August 2007,” Tim Moore, economics director at survey compiler IHS Markit, said.
Cost pressures for construction companies rose at the fastest rate since record began, with a sharp increase in supplier delivery times.
“Despite severe challenges with materials availability, construction firms remain highly upbeat about their near-term growth prospect,” Moore said.
Employment growth in construction firms was the highest since 2014, with demand for staff surging to a record pace in May.
The survey added to signs that the economy is on track for a swift rebound after shrinking ten per cent last year.
The Bank of England last month backed the economy to grow at its fastest rate since World War Two during 2021.
“Looking ahead, however, growth likely will start to slow as supply-side constraints bite,” said Samuel Tombs, chief economist at Pantheon Macroeconomics.
“Output in March was only 0.3 per cent below its 2019 average, and the further recovery in output since then has led to raw material and labour supply problems.”