Growth in construction output slowed in August to its lowest level since May this year, but remained on an upward trend, according to construction buyers.
The IHS Markit/CIPS Purchasing Managers’ Index eased from a 14-month peak in July, to 52.9 in August, 2.9 points above the crucial no-change mark.
There were encouraging signs, with new business still in growth and purchasing activity increasing for an 11th consecutive month. August’s employment growth was also close to the two-and-a-half year peak recorded in July.
But the industry’s positive showing appears finely poised. Commercial building was the best performing area in August, followed closely by residential, but housing growth was the weakest since March and civils output decreased for the first time in five months. A lack of new infrastructure projects was cited by numerous survey respondents, CIPS says.
It also pointed to a worrying decrease in the performance of product suppliers. CIPS blames low stock and labour shortages as the principal causes of the biggest deterioration in delivery times for over three years.
“Cracks in the construction sector’s masonry were beginning to show again this month. The housing sub-sector was hit hardest and civil engineering found itself in contraction territory,” said CIPS group director, Duncan Brock.
“Levels of new work held moderately steady overall, with significant growth held back by Brexit uncertainty, while it was logjams in supply chains that hampered work in hand. If there is anything positive to report from August, it is that the rate of hiring remained strong. But the sector is hovering too close for comfort to the no change mark, which makes it a contender for disappointment next month.”
Positives can be seen, however, in the optimism of outlook for the coming year among firms surveyed. According to IHS Markit, most companies are confident of organic growth through new project wins and geographical diversification, albeit with optimism stymied by uncertainty over Brexit.
IHS Markit associate director, Tim Moore, said: “There are some encouraging takeaways from the latest survey, especially the resilient degree of new business growth in August and a strong upturn in staff recruitment. Survey respondents noted that they are confident about achieving organic growth at their businesses in the coming 12 months. The degree of optimism reported in August remained constrained by external factors, including domestic political uncertainty, stretched supply chains and shortages of suitably skilled labour.”
