UK construction economy rose in May

UK construction economy expanded strongly again in May, but input cost pressures intensified on the back of sharply rising oil prices and steel shortages

That is the conclusion of the latest Construction Purchasing Managers' Index - a seasonally adjusted index designed to measure the overall health of the construction economy - published today (Wednesday).

It registered 56.3 in May, remaining above the critical no-change mark that divides growth from contraction for the 64th successive month.

Although still buoyant, a decline in the PMI from 57.6 in April indicated that the rate of expansion of activity eased slightly during this month.

Roy Ayliffe, director of professional practice at the Chartered Institute of Purchasing and Supply, said: "While purchasing managers saw a slight ease in the rate of construction sector growth during May, conditions nevertheless remained buoyant.

"Growth was driven principally by strong gains in new orders, although some firms reported gaps between the completion of existing contracts and the commencement of work on new projects.

"At the same time, surging oil prices and shortages of steel meant that panellists faced rising input price inflation," he said.

May saw the housing sector continued to expand at the fastest rate of the three broad areas of construction activity covered by this survey.

However, after rising in each of the previous 12 months, levels of civil engineering were slightly lower in May.

Driving the latest expansion of activity, the volume of new orders placed with construction firms rose sharply again in May - the 67th consecutive month of growth.

Construction firms also reported a further marked increase in their quantity of inputs purchased in May. The strength of demand for construction materials, coupled with shortages of certain commodities on international markets, resulted in severe bottlenecks at suppliers.

Finally, UK construction firms remained strongly upbeat in May that activity levels would be higher in a year's time than at present. An anticipated improvement in business conditions and planned expansions boosted confidence during this month.