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Construction data shows a mixed picture

7 April 2022

Construction data shows a mixed picture

The findings of the Construction Purchasing Managers’ Index (PMI) for March show the uncertainty, volatility and variation within the industry and the wider supply chain against the current economic background.

The data, compiled by S&P Global for the Chartered Institute of Procurement & Supply, pointed to a continued rise in UK construction output, helped by the fastest increase in new work for seven months. 

However, escalating inflationary pressures and concerns about the economic impact of the war in Ukraine contributed to a sharp drop in business optimism. The degree of confidence about the growth outlook was the weakest since October 2020.

The headline PMI figure, which measures month-on-month changes in total industry activity, registered 59.1 in March, unchanged from February and well above the 50.0 mark that separates expansion from contraction. This signalled the joint-fastest rate of output growth since June 2021.

Commercial work was the best-performing segment in March (index at 60.8), with projects restarting amid the rollback of pandemic restrictions. In contrast, the recoveries in civil engineering (index at 56.3) and residential work (54.9) lost momentum.

More positively, total new orders expanded at a robust and accelerated pace, with the latest rise the strongest since August 2021. Construction companies typically cited improving tender opportunities and resilient customer demand, despite some reports that economic uncertainty and rising costs had limited new business growth.

So there’s a lot of variation. 

Around 33% of the survey panel reported longer lead times for construction products and materials, while only 1% saw an improvement. Imbalanced supply and demand, alongside escalating energy, fuel and commodity prices, resulted in a rapid rise in average cost burdens in March. 

The overall rate of input price inflation accelerated sharply since February and was the highest for six months. 

Concerns about the war in Ukraine, forecasts of severe cost inflation and a less favourable global economic outlook all weighed on constructors' confidence in March. Around 48% of the survey panel expect a rise in business activity during the year ahead, while only 15% predict a decline. 

Duncan Brock, group director at the CIPS, said: "The crippling rise in inflation ramped up again as transport and raw materials went up in price. Longer wait times for deliveries were reported by a third of supply chain managers. 

“Construction companies are braced for more disruption on the horizon as a result of the Ukraine conflict. The rise in purchasing demand fed into higher costs for materials already in short supply as energy hikes also impacted on business costs.

"With these severe challenges, it is no surprise that business optimism for the months ahead has been affected and fell to levels last seen in October 2020,” he added.

We will have to wait and see if the inflationary pressures, rising energy prices and supply disruption caused by the war in Ukraine have an impact on construction activity and client sentiment. 


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