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The latest survey from Markit and the Chartered Institute of Purchasing & Supply (CIPS) also showed that input costs rose at their fastest rate since August 2008.
The seasonally adjusted Markit/CIPS Construction Purchasing Managers’ Index (PMI) scored 56.4 for March. This was fractionally weaker than February’s eight-month high of 56.5. Anything over 50 indicates growth.
New business growth remained marked, while the rate of reduction of staffing levels fell to the weakest in the current nine-month sequence of decline.
Each of the three areas of construction activity monitored by the survey registered growth in March. Civil engineering continued to record the fastest increase of the three categories, although the rate of expansion eased slightly since February. Residential construction rose for a third successive month, with the latest increase marked. Commercial was the weakest performing sub-sector in March for a second month running. Nonetheless, growth of activity remained solid.
New business received by UK construction companies increased for a thirteenth successive month in March. Panellists attributed the latest rise to increased opportunities to tender, and previously quoted work converting to firm contracts. However, the rate of new order growth slowed since February, and was below the long-run trend.
March data signalled a negligible reduction of employment in the UK construction sector, with the latest decrease in staffing levels the weakest in the current nine-month sequence of cuts. Falling employment was attributed to the continued need to control costs. However, this was partially offset by other companies increasing their workforces due to sustained growth of new orders and activity.
Subcontractor usage also decreased in March, leading to a further rise in availability.
Purchasing activity at UK construction companies increased solidly during March, reflective of higher output requirements. This led to a further lengthening of suppliers’ delivery times, with delays heightened by shortages of materials at vendors.
March data signalled a considerable rise in input prices faced by construction companies in the UK. The rate of cost inflation accelerated to a 31-month high, driven by higher raw material prices, particularly for fuel, oil and steel.
Panellists in the UK construction sector remained optimistic regarding future business expectations in March. Ongoing improvements are projected to boost new order intakes, therefore supporting a rise in activity. However, the degree of positive sentiment eased for a second successive month and was notably weak in the context of historical data. Anecdotal evidence suggested that concerns over public spending cuts continued to hamper confidence.
Market economist Sarah Ledger, author of the UK Construction PMI, said: “UK construction companies reported a strong end to the first quarter, with activity rising at a similar pace to the eight-month high recorded in February. The data therefore add to the generally positive flow of data that have been seen since the new year, adding to evidence that the economy rebounded strongly from the surprise contraction of GDP in the final quarter of last year.
“However, whether the resurgent growth will prove long-lasting remains in doubt. Worryingly, new order growth slowed more notably than that of activity in March, pointing to a slowdown in activity over the coming months, especially if the pattern is sustained. Mirroring this, confidence amongst constructors remained subdued, slipping to a three-month low, with many companies still wary about the possible impacts from public spending cuts.”
CIPS chief executive David Noble said: “On the surface there wasn’t much of a change in the construction sector in March, but there is plenty to put businesses on edge about their future prospects. Fractionally weaker levels of activity and a more noticeable slowdown in new orders contributed to an easing of business confidence, which remains at historically low levels.
“The spectre of government spending cuts is causing the greatest concern, particularly as government stimulus starts to crumble. We may also be at the tail-end of temporarily higher activity levels seen after Q4’s weather disruption.
“Similarly, although March saw the third monthly growth in a row of residential construction activity and staff reduction was its weakest in many months; other indicators showing continued volatility in house prices and poorer consumer confidence mean there is still a great deal of uncertainty.”
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