New Construction Orders - Fastest Rise Since 2007!

Wednesday, 4th April 2012

  Is there blue sky ahead for the construction industry? Positive news for construction and building services as March saw the strongest upturn in new construction orders since September 2007, four and a half years ago according to CIPS. The latest monthly survey of construction industry purchasing managers reports a marked expansion of UK construction sector output, with the rate of growth accelerating for a second successive survey period and confidence strengthening.   The seasonally adjusted Markit and Chartered Institute of Purchasing & Supply (CIPS) Construction Purchasing Managers’ Index (PMI) posted 56.7 in March. Up from 54.3 in February, the index has now posted above the 50.0 no-change level that separates growth from contraction in each month since January 2011. Moreover, the latest reading pointed to the sharpest expansion of output in 21 months.   Growth was registered across all three of the broad construction categories monitored – housing, commercial and civil engineering. Commercial was again the strongest performing of the sub-sectors, in line with the recent trend. However, the increase in civil engineering activity strengthened and was the fastest since March 2011. Only a slight increase in residential construction was indicated.   A substantial rise in new business received by UK construction companies was seen in March. Growth has now been sustained for six consecutive months, and the latest rise was the sharpest since September 2007. Panellists commented that a general improvement in market activity, increased tender opportunities and long-running negotiations coming to completion had boosted new work intakes in the latest survey period.   UK construction companies were optimistic in March that activity would rise over the next year. Positive sentiment strengthened to a 22-month high, indicating that confidence continued to improve. Expectations for new marketing initiatives, a more buoyant outlook among clients, rising tender opportunities and company expansions are all anticipated to support growth. Nonetheless, optimism remained below the historical average.   Markit chief economist Chris Williamson said: “The good weather appears to have led to a surge in demand for construction projects in March, adding to the recent flow of good news which suggests the economy will have skirted a recession.   “Construction companies reported the largest monthly rise in new orders for four-and-a-half years, driving building activity higher at the fastest rate since mid-2010. Coupled with increasing activity recorded in the first two months of the year, this bodes well for the sector’s contribution to overall growth of the economy in the first quarter and will raise hopes that the country has avoided a slide back into recession.