Construction growth hits six-month high in January

Growth in the construction sector rose to its highest level in six months, according to the Purchasing Managers’ Index (PMI).

Activity was boosted by a jump in new orders, with particularly high demand for commercial work. The index, compiled by IHS Markit and the Chartered Institute of Procurement & Supply (CIPS), registered 56.3 in January in comparison with the 54.3 reading in December. The reading represents the biggest expansion since July.

A reading above 50 indicates activity is expanding.

Rolled back pandemic restrictions were partly responsible for the change, with survey responders saying it boosted optimism and caused people to spend more on commercial projects. That pushed commercial construction to a six-month high of 57.6.

Civil engineering also returned to growth, coming in at 53.2. Housebuilding, however, saw its activity increase at its slowest pace for four months, at 54.3.

January was also the best month for job creation since October, as stronger work pipelines pushed companies to up their recruitment.

There were also signs that the materials shortages from 2021 have eased coming into 2022. Construction companies reported the delays for materials were at the lowest level since September 2020. The rate of inflation also eased. Recent government data showed the price of steel and timber fell at the end of 2021.

IHS Markit director Tim Moore said: “Higher energy, transport and raw material bills led to across-the-board increases in input prices during January, but fewer supply issues helped ease the overall rate of cost inflation to its lowest since March 2021.”

More than half of the respondents said they expect output to rise in 2022, with only one in 20 saying it would fall.

Scape group chief executive Mark Robinson said the results suggested the industry had overcome the challenge posed by the Omicron Covid-19 variant, but other risks had grown.

“Those immediate Covid concerns are hopefully now receding, but contractors and project leads will continue to be wary of rising inflation, with yesterday’s interest rate rise set to further influence budgets and bottom lines,” he said.

Lloyds Bank director for infrastructure and construction Max Jones said increasing optimism in the sector could see investment by contractors rise.

“Contractors are acutely aware of the need to be more sustainable and increasingly seek intelligent financial support so they can invest in the green technologies, new talent and better ways of working needed to realise the opportunities created by our move towards a lower carbon economy,” he said.

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