UK construction companies signalled a positive end to the year, led by the fastest rise in new order volumes since January 2016, according to IHS Markit.
Stronger demand patterns resulted in sustained job creation and a broad-based upturn in business activity during December. However, the construction sector continued to experience intense cost pressures as suppliers passed on higher imported raw material prices. The latest rise in overall input costs was the steepest for just over five-and-a-half years.
At 54.2 in December, up from 52.8 in November, the seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) signalled a robust and accelerated expansion of overall construction output.
The headline index has now posted above the 50.0 no-change mark for four months running, and the latest reading signalled the fastest pace of expansion since March 2016. Anecdotal evidence suggested that improving order books and a general rebound in business conditions had helped to lift construction output in December.
Residential building activity remained the best performing sub-category at the end of 2016. Moreover, the latest expansion of housing activity was the fastest since January. Work on civil engineering projects also picked up at a robust pace in December, while commercial construction increased only marginally.
Meanwhile, construction companies reported a reasonably upbeat assessment for their growth prospects in 2017. Around half of the survey panel (48%) anticipated a rise in business activity during the next 12 months, while only 13% forecast a reduction.
Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI, said: “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.”