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UK construction PMI touches nine-month high in December

UK construction

Activity in Britain’s construction sector expanded at the fastest rate in nine months in December, boosted by more house building, but sterling’s weakness drove the biggest rise in costs in over five years, an industry survey showed on Wednesday.

The Markit/CIPS purchasing managers’ index (PMI) rose to 54.2 in December, it’s strongest since March and well ahead of expectations in a Reuters poll for it to hold steady at November’s reading of 52.8.

Markit said building costs rose last month at a rate not seen since April 2011, and that companies reported shortages of materials, possibly because of extra demand as they stocked up to beat further price increases.

Tim Moore, Senior Economist at IHS Markit and author of the Markit/CIPS Construction PMI, said: “December’s survey data confirmed a solid rebound in UK construction output during the final quarter of 2016. All three main areas of construction activity have started to recover from last summer’s soft patch, but in each case growth remains much weaker than the cyclical peaks seen in 2014.

“Housebuilding remains a key engine of growth for the construction sector, with the latest upturn the fastest for almost one year. Meanwhile, commercial activity was the weakest performing category in December, reflecting an ongoing drag from subdued investment spending and heightened economic uncertainty.

“The main negative development in December was a sustained acceleration in input cost inflation to its strongest since 2011. UK construction companies noted that the weaker sterling exchange rate had resulted in higher costs for a wide range of imported materials, while some also reported that forward purchasing of inputs had led to depleted stocks among suppliers.”

Paul

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