Construction stays steady

7 March 2022

A highly regarded survey of the construction industry’s performance in February showed that business activity gained across the sector. Carried out by IHS Markit for the Chartered Institute of Procurement & Supply (CIPS), the Purchasing Managers' Index analysis was carried out before the Ukraine conflict started.

Building companies commented on the strongest rise in output since mid-2021 amid stronger client confidence and work on new projects commencing. Contractors continued to report widespread supply constraints and rapidly increasing input costs, though the rate of inflation in the latter was the least severe for 11 months. 

However, these factors dampened the year-ahead outlook for activity, with confidence at its lowest since January 2021.

The headline seasonally adjusted Total Activity Index registered 59.1 in February, up from 56.3 in January. The figure has now been above the neutral 50.0 threshold in each of the last 13 months.

Particularly good news for many hire companies is that house building (index at 61.5) replaced commercial work (58.4) as the best performing category of construction work for the month. 

Moreover, resilient pipelines of new work were highlighted by a steep rise in input buying across construction during. The February expansion was the fastest for seven months and commonly reflected pre-purchasing ahead ofnew project starts. 

The near-term outlook for construction activity remained positive. Just under half of the survey panel (48%) forecast an increase in output during the year ahead, while only 9% predicted a fall. 

On the other hand, the overall degree of optimism eased to the softest since January 2021 as firms cited concerns about the impact of rising costs and supply shortages.

Next month’s survey results will be significant to see how the mood has changed following the Ukraine conflict.