Chris Williamson comments on today’s UK construction PMI survey
Chris said: “The UK construction industry took on a record number of staff in June as activity in the sector continued to boom, according to PMI data. However, subcontractor pay rates have also risen at a survey-record pace in recent months as skill shortages reached all-time highs.
“The Markit/CIPS Construction PMI™ rose from 60.0 in May to 62.6 in June, signalling a rate of increase in building activity that has rarely been beaten since survey data were first collected in 1997.
“The marked rise in construction output follows news from the manufacturing PMI that the goods-producing sector saw the largest quarterly rise in output for two decades in the second quarter. The strong growth of both sectors should help drive a further robust increase in gross domestic product of a similar magnitude to the 0.7%-0.8% increase seen in previous quarters over the past year. Such persistent strong growth adds to the chance of interest rates starting to rise later this year, rather than a first rate hike being delayed until 2015.
“Commercial construction activity, house building and civil engineering all rose sharply again in June, albeit with the pace of growth of the latter easing to a nine-month low. But growth of commercial activity and house building accelerated, reflecting increased business investment in property such as offices, industrial units and retail space, as well as a surge in residential construction.
“The need to boost capacity to meet surging demand for building encouraged construction firms to take on extra staff at a rate never previously recorded in the survey’s 17-year history. The sector’s PMI Employment Index rose from an already-high 60.5 in May to 64.0.
“Employment in the sector has increased each month for just over a year as the recovery has taken hold. With business confidence about the year ahead remaining buoyant in June, further strong growth of hiring is likely as we move into the second half of the year.
“The growth is coming at a price though. Specifically, construction companies had to pay their subcontractors higher rates, amid record skill shortages.
“Average rates charged by subcontractors had risen at a survey-record pace in May, and the rate of increase eased only very slightly in June. The upward pressure on pay rates reflects widespread shortages of suitable subcontractors. Survey respondents have reported by far the steepest deterioration in subcontractor availability ever recorded by the survey in recent months, albeit with a very slight easing in June.
“The survey suggests that widespread skill shortages have developed after many tradesmen and subcontractors left the sector, or left the country, during the recession.”
