Construction Purchasers Report Strong July Bounce
The latest monthly survey of construction purchasing managers reveals a solid growth in activity in July, underpinned by the fastest increase in residential work for just over two-and-a-half years.
House building was the best performing category of construction activity in July, with the latest upturn the strongest since December 2015. Commercial work also picked up at the fastest pace for just over two-and-a-half years. Civil engineering activity increased only moderately, albeit at a sharper rate than in June. Construction companies noted that a lack of work to replace completed projects (particularly railway infrastructure work) continued to hold back growth in the civil engineering sub-sector.
July data pointed to the strongest increase in total new orders across the construction sector since May 2017. Survey respondents noted that a general improvement in client demand had led to successful contract negotiations on larger scale projects. Despite an upturn in tender opportunities, construction companies are cautious about the year-ahead business outlook. The degree of positive sentiment about future workloads was unchanged since June and remained weaker than the long-term survey average.
Meanwhile, the latest survey indicated that rising sales volumes helped to boost job creation in the construction sector. The rate of employment growth was the fastest since December 2015. Input buying also expanded at the strongest pace for just over two-and-a-half years. Greater purchasing activity led to the sharpest decline in supplier performance since July 2017.
“House building was the bright spot for construction growth in July, alongside a stronger upturn in commercial development projects. Residential activity and commercial work both increased at the sharpest pace since December 2015, which contrasted with another subdued month for civil engineering.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Purchasing managers were busier than ever this month with a welcome surge in new orders and the fastest rise in construction work since May 2017.
“Favourable circumstances lay the foundations for success with an easing in cost pressures to a three-month low and a rekindled enthusiasm from clients to place orders held back by uncertainty. Residential and commercial building took the overall lead with the most robust performances since December 2015 and even civil engineering put on a slightly better show.
“The fly in the ointment was longer lead-times across the construction supply chain. Rising demand meant that supply chains creaked under the strain and delivery times lengthened to the greatest extent seen in 12 months. Material shortages, limited inventories and capacity pressures bore down, as constructors caught up on previous weather delays and stocked up for new orders.