Construction output continues to rise, says PMI report

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Construction output in the UK continued to grow in the second quarter, despite a fall in housing activity. 

The June S&P Global UK Construction Purchasing Managers’ Index was 52.2 in June, down from 54.7 in May. 

Remaining above the 50.0 no-change mark for the fourth consecutive month, the latest reading signalled a sustained improvement in overall construction activity in the UK, although the pace of growth has softened from the previous month.

The main driver of growth continued to come from commercial activity, which increased markedly again in June - atthough the rate of expansion softened from May's two-year high. 

A slower increase in civil engineering activity was also recorded, with output up modestly. 

The only category to record a drop in activity was housing, where output fell solidly following a first increase in 19 months during May. 

Anecdotal evidence suggested the expansion in total activity reflected the securing of new contracts during the month. 

Data on new orders showed a fifth consecutive monthly expansion amid successful tendering and a rise in client activity. 

That said, the rate of growth in new business was only modest and the slowest since February. 

Some respondents indicated that uncertainty as a result of the general election had caused new work inflows to slow.

Despite the softer expansion in new orders, construction firms responded to greater workloads by taking on additional staff for the second month running. 

Plus the rate of job creation was solid and the sharpest since August last year. 

Rising new orders led firms to increase their purchasing activity for the second month running, with the rate of expansion little changed from that seen in May

Confidence in the ability to secure new contracts over the coming year supported continued optimism in the 12-month outlook for construction activity in June. 

Expectations that interest rates will start to come down also contributed to positive sentiment. 

More than half of respondents predicted an increase in construction activity, with the level of confidence broadly in line with that seen in May.

Andrew Harker, economics director at S&P Global Market Intelligence, said: “Continued growth of the UK construction sector in June meant that the sector has recorded sustained expansion throughout the second quarter of the year. 

“While there were signs of a slowdown in the latest survey period, most notably around housing activity, firms indicated that a slowdown in new order growth was in part related to election uncertainty.”

He added: “Moreover, confidence in the year ahead outlook remained strong and firms increased employment to the largest extent in ten months. 

“In terms of inflation, there remains little sign of cost pressures picking up to any great extent, encouraging firms to expand purchasing activity. Supply-chain conditions also remained favourable."

Data was collected  from June 12-27.

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