Construction growth slows

7 October 2021

Construction firms responding to the Purchasing Managers’ Index (PMI) survey for September show output volumes rising by the smallest extent for eight months. 

Compiled by IHS Markit for the Chartered Institute of Procurement & Supply, the survey also reports disruptions on site arising from unavailable transport, a severe lack of materials and continued staff shortages. 

Perhaps that’s a flip side to the rapid post-lockdown bounce back.  

Some firms also noted that the unpredictable pricing environment had slowed clients' decision-making on new orders and led to delays with contract awards. (This is something that was mentioned on the blog back in August.)

At 52.6 in September, down from 55.2 in August, the headline seasonally adjusted Activity Index figure dropped further below the 24-year high seen in June (66.3). House building decelerated in September at 52.8. However, although weakening, the latest reading still shows growth above the notional 50.0 no-change level. 

While indicating a slowdown, the survey nevertheless shows that construction firms remain upbeat about the business outlook. Just over half (51%) forecast rising output, while only 8% anticipate a decline.

True, there are concerns that supply chain difficulties will hinder growth. Duncan Brock, group director at the CIPS says that sub-contractors have been hindered by lower availability and higher prices, observing that “unless stronger supply chain performance is nailed down along with headcount, we are heading towards a stagnant autumn because the sector is certainly not on an even footing at the moment.” 

However, if there is a further slowdown, it would ironically be due to a lack of supply rather than weaker demand, suggesting a future upturn in due course.

Strange days indeed. 

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