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Construction ouput growth fastest since 2007

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Construction output rose at the fastest rate since the start of the downturn, according to a survey of construction purchasing managers.

According to the AJ’s sister title Construction News, the index from Markit and the Chartered Institute of Purchasing Managers showed construction output expanded at its fastest pace since September 2007.

The August reading of 59.1 was up from 57 in July and above the ‘no change’ level of 50 for the fourth consecutive month.

Respondents said that the amount of public infrastructure work had grown in addition to the widely cited rise in housing demand.

The amount of new work also grew at its fastest rate since March 2012 and construction employment rose for the third month in a row.

Construction firms was confident about the year ahead with 46 per cent expecting a rise in work and 10 per cent a reduction. They said their confidence derived from improvements to the wider economy which had made their clients more willing to spend.

Delivery times for materials lengthened by the greatest amount since June 2007 reflecting the strongest level of purchasing since March 2012.

Tim Moore, senior economist at Markit, said: “The latest construction purchasing managers index figures are yet another indication that the UK economy has performed impressively over the summer months. A steep upturn in civil engineering activity suggested that public sector demand has joined residential building as a key driver of construction output growth during August.

“With overall output levels now rising at the fastest pace for around six years, it seems highly likely that the construction sector will provide another positive contribution to UK GDP in the third quarter of 2013.

“New public sector infrastructure spending looks to have started making an impact on the ground, and this was a contributory factor behind the sustained construction sector job creation seen in August.”

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said: “A new dawn is breaking in construction. The industry recorded the fastest pace of growth since 2007 in August, leaving the dark days of recession behind. Builders have seen a step change in recent months and are now starting to show their true potential to the UK economy. Nowhere is this more true than in new business, where growth is at its second-strongest in almost six years, leading to more jobs and increasing confidence.

“Robust expansion can be seen in all three sub-sectors; house building is rising at a rate not seen since mid-2010, commercial growth is also strong, but it is the strongest growth in six years recorded in civil engineering that is a real cause for optimism and a sure sign the sector has overcome its previous difficulties.

“This new direction brings new challenges, not least the prospect of additional work and insufficient capacity to meet demand. How the sector navigates these tensions and manages the supply chain could come to define its performance over the coming months.”

Michael Conroy Harris, construction lawyer at law firm Eversheds, said: “After encouraging signs last month, the latest figures should continue to inject some much needed confidence into the industry.  While optimism around housing is rightly cautious as there is the risk that we might be looking at a bubble, it’s heartening to see an upturn in another sector and the increase in civil engineering activity suggests some strength and depth to the recovery.”

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