Housebuilding boosts UK construction in July
The UK construction industry regained some of its buoyancy in July, as executives in the sector reported the fastest rise in construction output since May last year.
The construction purchasing managers’ index climbed to 55.8 last month, a sharp rise from June’s reading of 53.1. Economists had expected a slight easing in the gauge, to 52.8, according to a poll for Thomson Reuters.
Much of the uptick was driven by work in the housebuilding sector. Housebuilding has routinely been the best-performing part of the construction industry but the latest PMIs pointed to the strongest increase in housebuilding activity since December 2015.
Other sectors also showed signs of recovery, adding weight to June figures that pointed to an improving pipeline of work.
Tim Moore of IHS Markit, which compiles the survey, said the July data “reveal an impressive turnround in the performance of the UK construction sector, with output growth the strongest for just over one year”.
“While the recent rebound in construction work has been flattered by its recovery from a low base earlier in 2018, there are also signs that underlying demand conditions have picked up this summer,” he added.
However, activity in the civil engineering sub-sector remained subdued in July, posting only slight growth compared with the previous month. The sector has struggled with a number of large infrastructure projects coming to an end, without similar scale replacement work.
Construction companies also remained wary about the outlook for the year ahead, with sentiment about future workloads unchanged since June and remaining below the long-term average.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the pick-up in the construction was a “surprising development, given the continued deadlock in Brexit talks”.
“Some survey respondents reported that they were particularly busy as they were making up for work postponed earlier in the year due to the bad weather, but most reported that underlying demand was picking up too,” he said.
But he added that the outlook for commercial construction work was “highly sensitive to Brexit talks” and “continued uncertainty” was likely throughout the second half of the year.
“We still think it’s too soon to look for a sustained revival to emerge in the construction sector.”