Sector boosted by 11-month high in new order growth

UK construction activity ended 2016 strongly, boosted by a fast rise in new orders.

The latest Markit/CIPS survey of construction purchasing managers recorded a 54.2 figure for December, up from 52.8 the previous month and well above the 50.0 no change value.

The sector was boosted by the fastest rise in new orders since January 2016.

However, the industry continued to experience intense cost pressures, as input costs once again increased, hitting a new five-and-a-half year high. Companies surveyed laid part of the blame on the weaker pound, which is leading to higher costs for imported materials.

The overall growth in activity beat economists’ expectations, who on average had been expecting a slight slowdown in activity growth to 52.6.

The positive December result comes after three months of solid growth in activity from September to November last year, according to the closely-watched index, after falls in activity last July and August following the Brexit vote.

Tim Moore, senior economist at Markit, said housebuilding remained the “key engine of growth” for the sector, after residential hit its fastest rate of growth for almost a year, although infrastructure and commercial activity also ticked up.

Moore added: “December’s survey data confirmed a solid rebound in UK construction output during the final quarter of 2016.

“All three main areas of construction activity have started to recover from last summer’s soft patch, but in each case growth remains much weaker than the cyclical peaks seen in 2014.”