British Construction Sector Logs Strong Growth In November

U.K. construction sector expanded at a faster pace in November on robust activity and new orders, survey data from IHS Markit showed Friday.

The Markit/Chartered Institute of Procurement & Supply construction Purchasing Managers' Index rose unexpectedly to 52.8 in November from 52.6 in October.

The score was forecast to fall to 52.2. The reading signaled an expansion of total business activity for the third straight month and also the fastest since March.

Among sub-sectors, house building activity was the best performer in November despite the pace of expansion easing to a three-month low. Commercial activity logged a marginal rebound in November, ending a five-month period of decline. Meanwhile, civil engineering work remained the weakest area of activity.

IHS Global Insight economist Howard Archer said the clear possibility that the economy will slow appreciably over the coming months despite its current resilience and an uncertain outlook for the housing market are concerns for the construction sector.

There were reports that heightened economic uncertainty was a key factor weighing on output growth across the construction sector.

Nonetheless, the survey showed that increased volumes of construction output were underpinned by a solid upturn in new work. Both business activity and incoming new work expanded at the strongest pace since March but the rates of expansion remained much softer than the peaks seen in 2014.

Job creation was maintained across the construction sector in November. A number of firms linked additional staff recruitment to robust confidence regarding the near-term demand outlook.

That said, business confidence was still softer than seen during the first half of the year.

Companies reported a steep rise in their cost burdens in November, with the rate of inflation the fastest for just over five-and-a-half years. This was linked to supplier price hikes in response to exchange rate depreciation.

Although the positive growth will provide some relief for the economy, continuing cost pressures will be a worry for the sector in the coming months, David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, said.

The impact of the weaker pound was widely felt in November, with cost inflation the strongest since early-2011, Noble said.

by RTT Staff Writer

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