Seven-year high for construction firms’ optimism

OPTIMISM within the construction industry surged to its highest level in more than seven years last month, as its rapid pace of expansion continued.

The Markit/CIPS Construction Purchasing Managers’ Index (PMI) edged down slightly to 62.5 in March, barely changed from 62.6 in February, but still well above the 50 mark that denotes growth.

The index has indicated growth in the sector since May last year, and scores have been exceptionally strong,, above 60 in each month, since November last year.

The confidence part of the index was most notably healthy in March, with the most positive outlook for the next 12 months since January 2007: only five per cent of firms anticipate a reduction in output.

Broken down by sub-sector, civil engineering slowed from February, when flood response work gave it the most rapid jump in business on record, while residential construction became the fastest-growing part of the industry once more.

Despite strong performance, emerging constraints on supply are starting to stress the sector, despite the fact that output is still some way below pre-crisis levels.

Delivery times for raw materials were extended by the second longest time since mid-1997.

Confirming suggestions from other organisations, Markit also reported that sub-contractor availability dropped by the largest amount in over 13 years.

“Strain on the supply chain with continued strong demand for products and people is driving up prices and has the potential to result in higher construction costs. This needs to be addressed if confidence is to translate into continued successful results,” said PwC’s Chris Temple.

David Noble of CIPS added: “Supply constraints have now been around for a long time, and with rising cost inflation, are a growing concern that could hold the sector back.”

The UK’s construction industry accounts for about seven per cent of Britain’s economy.