News Release
Purchasing Managers’ Index®
MARKET SENSITIVE INFORMATION
nd
EMBARGOED UNTIL 0930 (London / UTC) December 2
Markit/CIPS UK Construction PMI
2016
®
Construction rebound continues in November, but cost inflation strongest
for five-and-a-half years
Key findings:
Business activity rises at fastest rate since March



Commercial work picks up for first time in six
months
Suppliers continue to pass on higher imported
raw material costs
Data collected November 11-29
Markit/CIPS UK Construction PMI:
among construction firms. However, average cost
burdens rose sharply, with the rate of inflation the
steepest since April 2011.
The seasonally adjusted Markit/CIPS UK
®
Construction Purchasing Managers’ Index
®
(PMI ) picked up slightly to 52.8 in November,
from 52.6 in October, thereby signalling an
expansion of total business activity for the third
month running. Reports from survey respondents
cited improved order books, alongside resilient
client confidence and strong demand for
residential projects. There were again reports that
heightened economic uncertainty was a key factor
weighing on output growth across the construction
sector.
Housebuilding activity remained the best
performing category of construction output during
November, despite the pace of expansion slipping
to a three-month low. Construction firms
meanwhile reported a marginal rebound in
commercial activity, which ended a five-month
period of decline. Civil engineering work
remained the weakest area of activity.
Source: IHS Markit/CIPS
Summary:
November data indicated that the UK construction
sector continued to rebound from the weak patch
recorded on average during the third quarter of
2016. Business activity and incoming new work
increased at the strongest pace since March,
although both rates of expansion remained much
softer than the peaks achieved at the start of
2014. Greater workloads underpinned a further
solid rise in employment levels and input buying
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Increased volumes of construction output were
underpinned by a solid upturn in new work during
November. The latest rise in incoming new
business was the strongest since March and
contrasted with a sustained decline in sales
through the summer. Some construction firms
noted that their workloads had been boosted by a
resumption of projects that were delayed after the
Brexit vote. However, there were also reports that
the stronger inflation backdrop had led to intense
competitive pressures and squeezed margins.
© IHS Markit 2016
UK construction companies reported a steep and
accelerated rise in their cost burdens in
November, with the rate of inflation the fastest for
just over five-and-a-half years. This was
overwhelmingly linked to supplier price hikes in
response to exchange rate depreciation.
Purchasing activity meanwhile increased at the
fastest pace since the start of 2016. Stronger
demand for inputs and low stocks among vendors
resulted in the sharpest deterioration in supplier
performance since June.
Job creation was maintained across the
construction sector in November, while the latest
survey also highlighted the fastest rise in subcontractor usage so far in 2016. 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,
with construction companies generally noting that
Brexit-related uncertainty had the potential to
weigh on business activity during 2017.
Comments
Tim Moore, Senior Economist at IHS Markit and
®
author of the Markit/CIPS Construction PMI , said:
“UK construction companies experienced a steady
recovery in business activity during November,
which continues the rebound from the downturn
seen over the third quarter of 2016. The brighter
picture reflected another solid contribution from
residential building and renewed growth in
commercial work, which some companies linked to
a resumption of projects that had been delayed
after the Brexit vote.
“November’s survey data revealed the strongest
rise in overall new business volumes since March.
However, lingering economic uncertainty and
subdued investor sentiment meant that optimism
towards the year-ahead outlook remained close to
its lowest since early-2013.
“Input cost inflation accelerated to its fastest for
five-and-a-half years, driven by sharply rising
imported raw material prices. A number of firms
cited uncertainty related to supplier price hikes as
an emerging threat to the construction sector, with
survey respondents commenting on difficulties
forecasting project costs against a backdrop of
rapidly changing inflationary pressures.”
David Noble, Group Chief Executive Officer at
the Chartered Institute of Procurement & Supply,
said:
“The sector was on a firmer footing this month, as a
slight uptick in overall activity and the strongest level
of new business growth since March, resulted in
more stability after a summer of uncertainty at the
time of the EU vote.
“Purchasing activity grew at its fastest pace since the
beginning of the year as stronger workflows and
tenders materialising into actual projects prompted
increased levels of stock building. This resulted in a
sluggish response from suppliers, with the fastest
lengthening of delivery times since June, as pressure
on capacity and low stocks impacted on demand.
“Once again residential activity led the way, though
at softer rates than those seen in October and at a
more diminished rate than the survey’s long-range
norm. Though this positive growth will provide some
relief for the economy, continuing cost pressures will
be a worry for the sector in the coming months. The
impact of the weaker pound was widely felt in
November, with cost inflation the strongest since
early-2011. Higher prices were reported for a
number of materials including bricks, blocks and
slate, as businesses struggled with managing costs.
Yet, in spite of this grip on precious margins,
headcounts were increased and demand for subcontractors was also sustained.
“Reports of lingering uncertainty around the progress
of Brexit negotiations had business optimism divided,
where only 45% of respondents expected a rise in
activity next year – one of the lowest since the
middle of 2013. And, as commentators warn about
more inflationary impacts next year, the sector will be
concerned that decisions from policymakers must
ensure these effects are minimalised so that growth
is maintained.
– Ends –
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© IHS Markit 2016
®
UK Construction PMI by Category of Activity
Source: IHS Markit/CIPS
For further information, please contact:
For data and economic queries, please call:
For industry comments, please call:
IHS Markit
Joanna Vickers
Tel: +44 207 260 2234
Email: [email protected]
CIPS
Trudy Salandiak
Tel: +44 1780 761576
Email: [email protected]
Note to Editors:
Where appropriate, please refer to the survey as the Markit/CIPS UK Construction PMI ®.
The Purchasing Managers' Survey is based on data compiled from monthly replies to questionnaires sent to purchasing executives in
over 170 construction companies. The panel is stratified geographically and by Standard Industrial Classification (SIC) group, based on the
regional and industry contribution to GDP. The survey is based on techniques successfully developed in the USA over the last 60 years by
the National Association of Purchasing Management. It is designed to provide one of the earliest indicators of significant change in the
economy, being issued on the first working day of each month. The data collected are not opinion on what might happen in the future, but
hard facts on what is actually happening at "grass roots" level in the economy. As such the information generated on economic trends predates official government statistics by many months.
Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as
appropriate which will affect the seasonally adjusted data series. Historical data relating to the underlying (unadjusted) and seasonally
adjusted numbers are available to subscribers from Markit. Please contact [email protected]
About IHS Markit (www.ihsmarkit.com)
IHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and expertise to forge solutions for the major industries and
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© 2016 IHS Markit Ltd. All rights reserved.
About PMI
Purchasing Managers’ Index® (PMI®) surveys are now available for over 30 countries and also for key regions including the eurozone. They
are the most closely-watched business surveys in the world, favoured by central banks, financial markets and business decision makers for
their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends. To learn more go to
www.markit.com/product/pmi.
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© IHS Markit 2016
About CIPS
The Chartered Institute of Procurement & Supply (CIPS) is the world’s largest procurement and supply professional organisation. It is the
worldwide centre of excellence on procurement and supply management issues. CIPS has a global community of 118,000 in 150 countries,
including senior business people, high-ranking civil servants and leading academics. The activities of procurement and supply chain
professionals have a major impact on the profitability and efficiency of all types of organisation and CIPS offers corporate solutions
packages to improve business profitability. www.cips.org
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© IHS Markit 2016